Upcoming economic data, including the Bank of England’s rate decision and U.S. employment reports, could drive significant market moves. GBPUSD shows signs of a potential reversal after a prolonged downtrend, supported by strong momentum indicators but facing mixed price action.
The pound hit a one-month high as the dollar weakened on easing tariff tensions. Focus now shifts to the BoE’s expected rate cut and economic forecasts, which will be key in determining the pound’s next direction.
Overview
Upcoming economic data, including the Bank of England’s rate decision and U.S. employment reports, could drive significant market moves. GBPUSD shows signs of a potential reversal after a prolonged downtrend, supported by strong momentum indicators but facing mixed price action.
The pound hit a one-month high as the dollar weakened on easing tariff tensions. Focus now shifts to the BoE’s expected rate cut and economic forecasts, which will be key in determining the pound’s next direction.
Key Economic Events
Thursday 14:00 (GMT+2) - UK: Official Bank Rate (GBP)
Thursday 15:30 (GMT+2) - USA: Unemployment Claims (USD)
Friday 15:30 (GMT+2) - Canada: Employment Change (CAD)
Friday 15:30 (GMT+2) - USA: Non-Farm Employment Change (USD)
Technical Analysis
The GBPUSD currency pair has experienced a prolonged downward trend over the past four months, reaching a low of 1.20989. However, on January 13, a Hammer candlestick pattern indicated a potential reversal, signaling the end of the downtrend and the beginning of an upward movement. The GBP price rose above the 50-period Exponential Moving Average, suggesting increased buying pressure and positive market sentiment.
Additionally, the prices established a bullish failure swing, where the trough at 1.22487 did not fall below the previous trough and, subsequently, the price exceeded the peak at 1.24252. Unfortunately for bullish traders, this breakout was weak, resulting in a price retreat.
Supporting this bullish outlook, momentum indicators remain strong. The Momentum Oscillator and the Relative Strength Index (RSI) continue to hover above their respective neutral levels of 100 and 50, indicating persistent upward pressure and enhancing the probability of further gains.
Potential Upside Targets
Should the buyers maintain market control, traders may direct their attention toward the four potential resistance levels below:
1.24252: The initial price target is set at 1.24252, which represents the high point recorded on January 27.
1.26922: The second resistance is identified at 1.26922, representing the 161.8% Fibonacci Extension drawn from 1.24252 to 1.22487.
1.28107: The third support level is identified at 1.28107, reflecting the daily high from December 6.
1.29663: An additional price target is projected at 1.29663, representing the 261.8% Fibonacci Extension drawn from 1.24252 to 1.22487.
Potential Downside Targets
Should the sellers take market control, traders may consider the four potential support levels listed below:
1.24327: The first level of support is determined at 1.24327, representing the weekly Pivot Point, PP, calcuated using the standard methodology.
1.22487: The second support is identified at 1.22487, representing the swing low from Feebruary 3.
1.22052: The third support level is identified at 1.22052, reflecting the weekly support, S3, calculated using the standard Pivot Points methodology.
1.20989: An additional downward target is 1.20989, mirroring the trough marked January 13.
Fundamentals
The British pound climbed to a one-month high on Wednesday, reaching $1.25252, as the U.S. dollar weakened following a temporary reprieve on tariffs for Mexico and Canada. The dollar index fell 0.5%, reversing gains from earlier in the week when tariff threats had driven it to a three-week high.
With U.S.-China trade tensions still simmering, markets are now focused on the Bank of England’s upcoming rate decision. The BoE is widely expected to cut interest rates by 25 basis points to 4.5%, reflecting slowing UK growth and easing inflation. Investors will closely watch the Bank’s updated growth and inflation forecasts for further policy cues.
Conclusion
With the pound hitting a one-month high and GBPUSD showing signs of a potential reversal, market attention now turns to upcoming economic events. The Bank of England’s expected rate cut, along with key U.S. employment data, will play a crucial role in shaping market sentiment. While technical indicators suggest bullish momentum for GBPUSD, mixed price action and broader macroeconomic factors, including trade tensions, will continue to influence the pair's direction in the coming days.