empty
27.01.2025 06:36 AM
GBP/USD Overview: Weekly Preview – The Pound Relishes Its Correction

This image is no longer relevant

The GBP/USD currency pair experienced a significant growth on Friday. While the PMI indices from the UK and the US played a role in this movement, one must question whether the 150-pip rise is truly warranted based on these reports. The Manufacturing PMI climbed to 48.2, which remains below the critical threshold of 50.0—any value below this indicates a contraction. The Services PMI only slightly improved from 51.1 to 51.2. At first glance, the data might seem positive, but a closer examination reveals that it likely couldn't have caused such a significant shift, especially one that is seldom seen even after central bank meetings.

It's important to note that the market seems to be leaning towards buying the pound primarily due to a long-standing correction; the pound has been in decline for a long time. This might not just be about purchasing sterling, but rather about selling the dollar, possibly influenced by Donald Trump's forthcoming decisions. Alternatively, it could simply be that traders are taking profits from short positions they have held for the past 3.5 months. Regardless of the reason, we do not see a strong long-term justification for sustained growth in the pound. The 16-year downtrend remains intact, and the 4-month downtrend has not been broken. On the daily chart, the recent increase in the pound is minor compared to its previous decline. Therefore, while the pound may continue to rise for another week or two, this does not negate either the larger or smaller downtrend.

Further growth for the pound is likely to be challenging. This week, the Federal Reserve will hold its first meeting of 2025, and it's almost guaranteed that interest rates will remain unchanged. Meanwhile, the Bank of England is expected to cut rates next week, with additional cuts likely to follow later this year. There are no significant data releases scheduled in the UK this week, but that may not be necessary—sufficient information has already been gathered about the state of the British economy, and there hasn't been much positive news.

In contrast, the US will have a far busier week. On Tuesday, a crucial report on durable goods orders will be released. On Wednesday, the Federal Reserve meeting will conclude. On Thursday, another important report will be published. On Friday, the Personal Consumption Expenditures (PCE) Price Index will be issued. The GDP for the fourth quarter is expected to show stable and strong results, and the Fed is unlikely to suggest any rate cuts in the near future. It's also worth noting that Trump plans to pressure Powell to cut rates, similar to what he did four years ago. He insisted persistently and frequently summoned Powell for discussions, but ultimately, it did not lead to any changes. From our perspective, there's no reason to fear the Fed succumbing to Trump's demands. Trump has his own responsibilities, and the Fed has its own. If Trump wishes to pursue his "Napoleonic plans," the consequences of those plans will rest squarely on his shoulders.

This image is no longer relevant

The average volatility of the GBP/USD pair over the last five trading days is 114 pips, considered "high" for this pair. Therefore, on Monday, January 27, we expect the pair to move within a range limited by the levels 1.2364 and 1.2592. The upper linear regression channel is directed downward, signaling a bearish trend. The CCI indicator recently entered the overbought zone and may form a bearish divergence, suggesting a potential downward trend resumption.

Nearest Support Levels:

  • S1 – 1.2451
  • S2 – 1.2390
  • S3 – 1.2329

Nearest Resistance Levels:

  • R1 – 1.2512
  • R2 – 1.2573
  • R3 – 1.2634

Trading Recommendations:

The GBP/USD pair remains in a downward trend. Long positions are still not recommended, as we believe all factors driving the British pound's growth have already been fully priced into the market, and no new bullish catalysts are present.

If you trade based on pure technical analysis, long positions may be considered with targets at 1.2573 and 1.2592, provided the price stabilizes above the moving average line. However, short positions remain much more relevant, with targets at 1.2207 and 1.2146. The price must consolidate below the moving average for these to become viable.

Explanation of Illustrations:

Linear Regression Channels help determine the current trend. If both channels are aligned, it indicates a strong trend.

Moving Average Line (settings: 20,0, smoothed) defines the short-term trend and guides the trading direction.

Murray Levels act as target levels for movements and corrections.

Volatility Levels (red lines) represent the likely price range for the pair over the next 24 hours based on current volatility readings.

CCI Indicator: If it enters the oversold region (below -250) or overbought region (above +250), it signals an impending trend reversal in the opposite direction.

Paolo Greco,
Analytical expert of InstaForex
© 2007-2025
Select timeframe
5
min
15
min
30
min
1
hour
4
hours
1
day
1
week
Earn on cryptocurrency rate changes with InstaForex
Download MetaTrader 4 and open your first trade
  • Grand Choice
    Contest by
    InstaForex
    InstaForex always strives to help you
    fulfill your biggest dreams.
    JOIN CONTEST

Recommended Stories

Why Did the Euro and Pound Rise Despite Trump Announcing New Tariffs?

The euro and pound ignored the fact that U.S. President Donald Trump instructed his administration to consider imposing retaliatory tariffs on multiple trading partners, increasing the likelihood of a broader

Jakub Novak 12:39 2025-02-14 UTC+2

EUR/USD: Analysis and Forecast

The EUR/USD pair is attempting to reach the key psychological level of 1.0500. This strengthening is driven by President Donald Trump's decision to delay the implementation of reciprocal tariffs, which

Irina Yanina 12:33 2025-02-14 UTC+2

USDX: Trump's Decision to Delay Reciprocal Tariffs Weakens the Dollar

The U.S. Dollar Index (USDX), which tracks the dollar's performance against six major currencies, is showing some stability following recent losses. This comes amid a decline in U.S. Treasury yields

Irina Yanina 12:27 2025-02-14 UTC+2

Why is the U.S. Stock Market Ignoring Rising Inflation? (Possibility of Further Growth in #SPX and #NDX)

It appears that both American investors and those involved in the local stock market have largely dismissed strong inflation data from the U.S. But why is that? This week's reports

Pati Gani 09:35 2025-02-14 UTC+2

What to Pay Attention to on February 14? A Breakdown of Fundamental Events for Beginners

Friday's macroeconomic events are neither too numerous nor too few. The Eurozone will release its second GDP estimate for the fourth quarter, which is objectively less significant than the first

Paolo Greco 07:21 2025-02-14 UTC+2

Overview of the GBP/USD Pair on February 14: The British Pound Continues Its "Roller Coaster Ride"

On Thursday, the GBP/USD currency pair tested the Murray level "5/8" at 1.2512 for the third time in recent days. Another rebound from this level led to a further decline

Paolo Greco 04:36 2025-02-14 UTC+2

Overview of the EUR/USD Pair on February 14: Flat and Confusion Persist

On Thursday, the EUR/USD currency pair attempted to continue its upward movement, but this effort was largely unsuccessful, leading to a decline in the latter half of the day. Overall

Paolo Greco 04:35 2025-02-14 UTC+2

GBP/USD. Tailwinds for the Pound: Sterling Rises Amid Accelerating UK Economy

The British pound rose to a new weekly high against the US dollar on Thursday, reacting positively to the release of recent UK economic data. Most components of the report

Irina Manzenko 23:45 2025-02-13 UTC+2

The Euro is Tired of War

If the Federal Reserve can afford to slow down monetary expansion, why shouldn't the European Central Bank do the same? Statements from Bundesbank President Joachim Nagel suggest that

Marek Petkovich 23:45 2025-02-13 UTC+2

XAU/USD. Analysis and Forecast

Gold is experiencing a modest intraday increase, although it remains below the record high reached earlier this week. However, the lack of momentum is limiting further upside movement. Investor concerns

Irina Yanina 11:36 2025-02-13 UTC+2
Can't speak right now?
Ask your question in the chat.
Widget callback
 

Dear visitor,

Your IP address shows that you are currently located in the USA. If you are a resident of the United States, you are prohibited from using the services of InstaFintech Group including online trading, online transfers, deposit/withdrawal of funds, etc.

If you think you are seeing this message by mistake and your location is not the US, kindly proceed to the website. Otherwise, you must leave the website in order to comply with government restrictions.

Why does your IP address show your location as the USA?

  • - you are using a VPN provided by a hosting company based in the United States;
  • - your IP does not have proper WHOIS records;
  • - an error occurred in the WHOIS geolocation database.

Please confirm whether you are a US resident or not by clicking the relevant button below. If you choose the wrong option, being a US resident, you will not be able to open an account with InstaForex anyway.

We are sorry for any inconvenience caused by this message.