Global markets face shifting conditions as key data releases shape sentiment. Interest rate decisions from Australia and New Zealand, along with inflation reports from the UK and Canada, will offer insight into central bank policies. Meanwhile, U.S. unemployment claims and PMI readings will gauge labor market resilience.
The British pound has rebounded, driven by technical signals and unexpected Q4 growth. While bullish momentum persists, traders remain cautious amid investment slowdowns and inflation concerns. With economic uncertainty ahead, markets remain finely balanced between recovery and caution.
Overview
Global markets face shifting conditions as key data releases shape sentiment. Interest rate decisions from Australia and New Zealand, along with inflation reports from the UK and Canada, will offer insight into central bank policies. Meanwhile, U.S. unemployment claims and PMI readings will gauge labor market resilience.
The British pound has rebounded, driven by technical signals and unexpected Q4 growth. While bullish momentum persists, traders remain cautious amid investment slowdowns and inflation concerns. With economic uncertainty ahead, markets remain finely balanced between recovery and caution.
Key Economic Events
Tuesday 5:30 am (GMT+2) - Australia: Cash Rate (AUD)
Tuesday 09:00 am (GMT+2) - UK: Claimant Count Change (GBP)
Tuesday 15:30 (GMT+2) - Canada: CPI m/m (CAD)
Wednesday 03:00 am (GMT+2) - New Zealand: Official Cash Rate (NZD)
Wednesday 09:00 am (GMT+2) - UK: CPI y/y (GBP)
Thursday 02:30 am (GMT+2) - Australia: Employment Change (AUD)
Thursday 15:30 (GMT+2) - USA: Unemployment Claims (USD)
Friday 09:00 am (GMT+2) - UK: Retail Sales m/m (GBP)
Friday 10:15 am (GMT+2) - France: Flash Manufacturing PMI (EUR)
Friday 10:15 am (GMT+2) - France: Flash Services PMI (EUR)
Friday 10:30 am (GMT+2) - Germany: Flash Manufacturing PMI (EUR)
Friday 10:30 am (GMT+2) - Germany: Flash Services PMI (EUR)
Friday 11:30 am (GMT+2) - UK: Flash Manufacturing PMI (GBP)
Friday 11:30 am (GMT+2) - UK: Flash Services PMI (GBP)
Friday 15:30 (GMT+2) - Canada: Retail Sales m/m (CAD)
Friday 16:45 (GMT+2) - USA: Flash Manufacturing PMI (USD)
Friday 16:45 (GMT+2) - USA: Flash Services PMI (USD)
Technical Analysis
After establishing a low at 1.20989 on January 13, the British Pound (GBP) initiated a notable recovery against the US Dollar (USD), underpinned by key technical indicators. A Hammer candlestick formation marked the conclusion of the prior downtrend, setting the stage for a reversal. This was subsequently reinforced by a failure swing pattern, which confirmed the shift to an uptrend. Notably, the trough at 1.21600 held above the prior trough, while the price action breached the peak at 1.23053, affirming bullish momentum.
Further strengthening the technical outlook, GBPUSD advanced beyond both the 20-period and 50-period Simple Moving Averages (SMA), forming a "Golden Cross" pattern—characterized by a short-term SMA crossing above a longer-term SMA—typically indicative of sustained upward momentum.
Momentum-based indicators corroborate this bullish bias. The Momentum Oscillator has risen above the 100 threshold, while the Relative Strength Index (RSI) remains above the 50 level, collectively reinforcing the prevailing upside pressure.
Potential Upside Targets
If buyers maintain control of the market, traders may shift their focus to the following four potential resistance levels:
1.26297: The first level of resistance is determined at 1.26297, which reflects the daily high marked February 14.
1.26922: The second resistance level is observed at 1.26922, which aligns with the 161.8% Fibonacci Extension drawn from 1.25228 to 1.22487.
1.28107: The third price target is established at 1.28107, which corresponds to the peak from December 6.
1.29663: An additional price objective is projected at 1.29663, representing the 261.8% Fibonacci Extension drawn from the high point, 1.25228, to the low point, 1.22487.
Potential Downside Targets
If sellers take control of the market, traders may focus on the following four key support levels:
1.25228: The initial support level is estimated at 1.25228, representing the swing high marked January 27.
1.24003: The second support level is determined at 1.24003, aligning with the weekly support, S1, calculated using the standard Pivot Points methodology.
1.22487: The third downside target is observed at 1.22487, corresponding to the swing low from February 3.
1.20989: An additional downside target is noted at 1.20989, reflecting the daily low marked January 13.
Fundamentals
The UK economy unexpectedly grew by 0.1% in Q4 2024, defying expectations of a contraction, with December's strong performance driving the surprise uptick. The services sector, particularly wholesale, film distribution, and hospitality, led the growth, though business investment fell sharply by 3.2%. Despite outperforming major European economies, the UK still lagged behind U.S. growth.
However, the outlook for 2025 remains subdued. The Bank of England halved its growth forecast to 0.75%, citing supply constraints and inflation risks. Businesses anticipate job cuts and reduced investment, with added pressure from tax hikes and global economic uncertainty. While the government has pledged regulatory reforms to spur growth, weak domestic demand and falling GDP per capita signal ongoing economic strain.
Conclusion
With a week of pivotal economic data ahead, markets remain at a crossroads, balancing technical momentum with fundamental uncertainty. The British pound's recent recovery suggests underlying strength, yet economic headwinds—including weak business investment and slowing growth forecasts—continue to cast a shadow over the longer-term outlook. Key economic events, from inflation readings to employment data, will provide crucial insights into policy trajectories and market sentiment. As traders navigate these shifting dynamics, attention remains on central bank decisions and macroeconomic indicators that could determine the next phase of market direction.