A volatile trading week lies ahead as several high-impact economic events are set to shape market sentiment across key assets. Major data releases, including inflation figures from the UK and the US, Australia’s employment change, and US crude oil inventories, will be closely monitored by traders for potential price shifts. Additionally, geopolitical tensions and trade policy concerns, particularly in light of President-elect Donald Trump’s tariff plans, continue to support the US dollar’s strength.
Overview
A volatile trading week lies ahead as several high-impact economic events are set to shape market sentiment across key assets. Major data releases, including inflation figures from the UK and the US, Australia’s employment change, and US crude oil inventories, will be closely monitored by traders for potential price shifts. Additionally, geopolitical tensions and trade policy concerns, particularly in light of President-elect Donald Trump’s tariff plans, continue to support the US dollar’s strength.
Key Economic Events
Wednesday 09:00 am (GMT+2) - UK: CPI y/y (GBP)
Wednesday 15:30 (GMT+2) - USA: CPI m/m (USD)
Wednesday 15:30 (GMT+2) - USA: Crude Oil Inventories (USD)
Thursday 02:30 am (GMT+2) - Australia: Employment Change (AUD)
Thursday 09:00 am (GMT+2) - UK: GDP m/m (GBP)
Thursday 15:30 (GMT+2) - USA: Retail Sales m/m (USD)
Thursday 15:30 (GMT+2) - USA: Unemployment Claims (USD)
Friday 09:00 am (GMT+2) - UK: Retail Sales m/m (GBP)
Technical Analysis
Since reaching a high of 1.34337 on September 26, the GBPUSD pair has displayed a clear bearish reversal, forming a pattern known as a non-failure swing in technical analysis. The peak at 1.34337 exceeded the prior peak, but prices subsequently dropped below the trough at 1.30019, signaling the beginning of a sustained downtrend. This downward move has been marked by a consistent pattern of lower peaks and lower troughs, with the pair trading below the 50-period Exponential Moving Average (EMA) for the past 10 weeks, underscoring the bearish momentum.
A potential turning point appeared with the recent formation of a Hammer candlestick at 1.20989, which briefly renewed bullish hopes for a rally. Despite this reversal signal, the broader technical landscape continues to favor a bearish outlook. The price remains below the 50-period EMA, maintaining downward pressure. Additionally, the Momentum oscillator continues to print values below the 100 baseline, indicating that bearish momentum is still dominant. The Relative Strength Index (RSI), while remaining below the neutral level of 50, has edged above the 30 oversold threshold, hinting at a possible pause in the ongoing downtrend or a short-term corrective move to the upside.
While the Hammer candlestick and the RSI's recovery from oversold territory suggest that a temporary bounce may occur, the overall bearish trend remains intact. For now, the path of least resistance remains to the downside, with further declines likely if prices fall below the recent low at 1.20989. Conversely, any sustained rally would require confirmation through a break above key resistance levels and an improvement in momentum indicators.
Potential Upside Targets
If the bulls take control of the market, traders may consider the following four potential upside targets:
1.23237: The first resistance is seen at 1.23237, which corresponds to the weekly Pivot Point, PP, calculated using the standard methodology.
1.24744: The second price target is identified at 1.24744, representing the trough from December 20 and the 50-period Exponential Moving Average.
1.27089: The third resistance level is established at 1.27089, representing the weekly resistance, R2, calculated using the standard Pivot Points methodology.
1.29238: An additional resistance is recognized at 1.29238, aligning with the 61.8% Fibonacci Retracement drawn from the high point, 1.34337, to the low point, 1.20989.
Potential Downside Targets
If the bears maintain control of the market, traders may find potential opportunities in the following four downside targets:
1.20989: The initial level of support is identified at 1.20989, corresponding to the daily low marked on January 13.
1.19906: The second support level is observed at 1.19906, reflecting the 261.8% Fibonacci Extension drawn from the swing low, 1.23519, to the swing high, 1.25752.
1.19385: The third level of support is 1.19385, which corresponds to weekly support, S2, calculated using the standard Pivot Points methodology.
1.17673: An additional support is seen at 1.17673, reflecting a 361.8% Extension drawn from the swing low of 1.23519, to the swing high, 1.25752.
Fundamentals
The US dollar remains firmly near a two-year high as traders scale back expectations for Federal Reserve rate cuts in 2025. Market sentiment has shifted amid rising geopolitical uncertainty, with President-elect Donald Trump signaling plans to reintroduce tariffs. This renewed focus on trade protectionism has reignited concerns over global trade dynamics and inflation, placing downward pressure on major currencies such as the euro, yen, and pound. The combination of reduced rate cut expectations and heightened trade risks continues to bolster the dollar’s appeal as a safe-haven asset.
Conclusion
With a packed calendar of high-impact economic events and ongoing geopolitical tensions, markets are poised for heightened volatility in the coming days. Traders will closely watch key data releases and technical levels to gauge the direction of major assets, particularly the GBPUSD pair, which remains under bearish pressure despite a recent attempt at recovery. Meanwhile, the US dollar’s strength, driven by diminished expectations for Fed rate cuts and renewed trade concerns, will likely continue to influence broader market sentiment.