Created on January 14, 2025

• In my daily analysis of major currency pairs, the GBP/USD pair has caught my attention as we fell yet again during the Monday session.
• In fact, we slammed into the crucial 1.21 level, an area that was a major swing low previously, and therefore could be an area of interest.
• After all, a certain amount of “market memory” should be found here, and so far, the reaction has been rather strong.

Technical Analysis

The technical analysis for this GBP/USD pair is obviously horrible, but I think you’ve got a situation where you have to look at this through the prism of whether or not we are oversold at the moment. I think that’s probably the case, and therefore this bounce will make a certain amount of sense, however, I do not like the idea of “fishing for a bottom” here, despite the fact that most technical analyst would suggest this is a real possibility.

This is mainly due to the fact that the market is driven by questions about the British ability to get a reasonable budget past, and of course the whole idea that the Federal Reserve is light years away from doing anything remotely close to loosening monetary policy. After all, traders had initially thought that the Federal Reserve is going to cut multiple times in 2025, but the reality is that they will not be able to, and therefore I think you’ve got to look at this as a market that is pricing that in. However, we had gotten to far to the downside and I think it’s only a matter of time before we get a bit of a bounce. That bounce should end up being thought of as a “buying opportunity for US dollars.” The 1.2350 level is an area that I would love to start shorting from, but we will have to wait and see if we can even get that far to the upside.

The alternative is that we break down below the 1.21 level and then go looking to the 1.20 level after that. The 1.20 level is obviously a large, round, psychologically significant figure, and I do think it’s an area that we will eventually try to get to. That being said, over the last 4 sessions, we have dropped roughly 400 pips, and a bounce would make a certain amount of sense. Look for exhaustion to take advantage of.

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The EURUSD price couldn’t manage to hold for long time below 1.0220$, to trade positively and attempts to recover, noticing that the EMA50 forms negative pressure that prevents the price from achieving more rise, while stochastic loses its positive momentum clearly.

Therefore, these factors encourage us to suggest the return to decline in the upcoming sessions, waiting to confirm breaking 1.0220$ to open the way to head towards 1.0100$ as a next main target, noting that breaching 1.0325$ will stop the bearish wave and lead the price to start bullish correction on the intraday basis.

The expected trading range for today is between 1.0165$ support and 1.0320$ resistance

Trend forecast: Bearish

The EURUSD price fluctuates around 1.0265$ level, noticing that stochastic reaches the overbought areas, waiting to motivate the price to decline again, to keep the bearish trend suggested for today unless breaching 1.0325$ and holding above it, noting that our targets begin by breaking 1.0220$ to open the way to head towards 1.0100$ as a next negative station.

The expected trading range for today is between 1.0165$ support and 1.0320$ resistance

Trend forecast: Bearish

Created on January 14, 2025

• During my daily analysis of the major currency pairs, the first thing that I look to is the EUR/USD pair, as we have plunged below the 1.02 level during the trading session.
• That being said, I do think that a bounce is very likely, just due to the fact that we are oversold.
• However, I do not expect this to be a situation where you can just simply short the market and forget about it, because I believe that the volatility will probably only pick up, and therefore it makes the ability to be nimble crucial when it comes to this currency pair.

Technical Analysis

The technical analysis for this EUR/USD pair is extraordinarily dour, but the word “oversold” cannot be ignored. Ultimately, I think that the euro continues to fall in probably goes looking to the parity level given enough time, but it’s a bit difficult to jump into this market and start shorting heavily. Any bounce at this point in time would look very much like a selling opportunity at the first signs of exhaustion. This is a market that I have no interest in buying, and with that being the case I think you have to look at this as a scenario where we are looking at the 1.03 level as a potential ceiling, and then after that the 1.0450 level. Either one of those areas could be excellent shorting opportunities if we show signs of exhaustion.

On the other hand, if we simply fall from here, then I think it’s probably going to be a move to the parity level rather quickly. The parity level obviously will attract a lot of attention, but at the end of the day we had been there before, and therefore I think you’ve got a situation where a lot of people will simply take profit in that area as well. I have no scenario in which I’m willing to buy the euro at this point, at least not with the 10 year yield in America being as high as it is.

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• Risk appetite increased after China announced more stimulus measures.

• All eyes are now on US inflation figures.

• The pound remained fragile due to the recent bond market rout.

The GBP/USD price analysis shows some relief for the pound as market participants await crucial US inflation data. Nevertheless, the long-term outlook remains clouded as traders worry about UK finances amid turmoil in the bond market.

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The dollar eased slightly at the start of a new week. Risk appetite increased after China announced more measures to support its weak economy and the yuan. However, dollar bulls remain strong after the recent upbeat jobs report. Market participants expect the Fed to lower borrowing costs by 30-bps this year. This is a drop from the 50-bps expected at the start of the year. 

All eyes are now on US inflation figures, which will continue shaping the outlook for rate cuts. Economists expect consumer inflation to increase by 0.3%, similar to the previous reading. At the same time, they expect the annual figure to hold at 2.6%. A bigger-than-expected figure will lower the likelihood of a Fed rate cut this year. On the other hand, a downbeat report might bring back bets for two rate cuts this year. However, before the CPI report, traders will focus on wholesale inflation.

Elsewhere, the pound remained fragile due to the recent bond market rout. Market participants worry that the yield rally will force the government to adjust fiscal policy, hurting the economy.

GBP/USD key events today

GBP/USD technical price analysis: Bears aim for a new low in the downtrend

On the technical side, the GBP/USD price is dropping after retesting the 1.2250 key level. Bears have maintained a solid decline since the price broke below the 1.2400 support level. However, the downtrend paused at the 1.2102 level. Nevertheless, the bearish bias remains strong since the price still trades below the 30-SMA with the RSI in bearish territory. 

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Furthermore, if bears are ready to resume the downtrend, the price will soon break below the 1.2102 level to make a lower low. However, if the level holds firm, GBP/USD will make a double bottom, which could lead to a bullish reversal. The trend will only change when the price breaks above the SMA and the RSI above 50.

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Created on January 14, 2025

My previous GBP/USD signal on 6^th January was not triggered as there was no bearish price action when the two nearest resistance levels were first reached that day.

Today’s GBP/USD Signals

Risk 0.75%.

Trades must be entered prior to 5pm London time today.

Long Trade Ideas

• Go long following a bullish price action reversal on the H1 timeframe immediately upon the next touch of $1.2188 or $1.2166 or $1.2096.
• Put the stop loss 1 pip below the local swing low.
• Adjust the stop loss to break even once the trade is 25 pips in profit.
• Take off 50% of the position as profit when the price reaches 25 pips in profit and leave the remainder of the position to run.

Short Trade Ideas

• Short entry following a bearish price action reversal on the H1 timeframe immediately upon the next touch of $1.2245 or $1.2270 or $1.2324.
• Put the stop loss 1 pip above the local swing high.
• Adjust the stop loss to break even once the trade is 25 pips in profit.
• Take off 50% of the position as profit when the price reaches 25 pips in profit and leave the remainder of the position to run.

The best method to identify a classic “price action reversal” is for an hourly candle to close, such as a pin bar, a doji, an outside or even just an engulfing candle with a higher close. You can exploit these levels or zones by watching the price action that occurs at the given levels.

GBP/USD Analysis

I wrote in my previous GBP/USD forecast last week that the price was likely to respect the new support level at $1.2435 as the day’s pivotal point.

This was a good call as the price did rise fairly strongly once it broke above that level, and it reached $1.2500 (and quite far beyond) just as I forecasted.

The technical and fundamental/sentimental pictures have become more bearish over the past week, although that may have changed over the last day or so.

Until yesterday, the price fell quite strongly, within the bearish price channel represented by the linear regression analysis shows within the price chart below. The price reached a new 1-year low below $1.2100, partly on US Dollar strength (the US Dollar index was making a new 2-year high at the time), and partly on bets against the British Pound which have emerged in the markets as the new British government’s fiscal projections are regarded with some incredulity by the capital markets, and the government plunges rapidly to very unpopular ratings in opinion polls.

Despite this bearish picture, we see a rebound from yesterday, partly due to the news that the incoming Trump administration may be prepared to implement tariffs on US important gradually rather than all at once, which weakened the Dollar a bit.

The price has made a weak bullish breakout beyond the top of the descending price channel and now faces what looks likely to be a very pivotal resistance zone centred on $1.2250. If the price can get established above $1.2265 today, it will probably rise to $1.2324. However, so far we are seeing a bearish double top at $1.2265, so the price might remain below this level.

There is nothing of high importance due today concerning the GBP. Regarding the USD, there will be a release of PPI data today at 1:30pm London time.

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