GBPUSD, Silver Outlook: BOE Decision and Haven Exhaustion

Key Events:

• BOE Monetary Policy vs Inflation Risks
• US Data vs Trade War Risks
• Gold and Silver Exhaust Haven Momentum
• Technical Analysis: GBPUSD and XAGUSD (Monthly and 3-Day Time Frames)

BOE Monetary Policy vs Inflation Risks

GBPUSD appears to have priced in the expected BOE 25 bps rate cut, holding above the 1.24 level while the FTSE 100 reaches record highs. Volatility risks may arise from the vote outcome and future policy outlook, particularly amid global inflation concerns. As long as GBPUSD stays above 1.20, its long-term bullish rebound remains intact.

US Economic Metrics: Trade and Inflation Risks

The ISM Manufacturing PMI hit its highest level since October 2022, exceeding the 50-expansion threshold for the first time in 26 months. Meanwhile, ISM Services PMI declined to two-month lows but maintained expansion at 52.8. December’s payroll data fueled inflation fears, exacerbated by Trump-era tariffs and trade war risks. The US Dollar Index remains above 107, while GBPUSD hovers near 1.24, awaiting confirmation from tariff negotiations, FOMC insights, and Friday’s non-farm payroll report.

Precious Metals and Market Uncertainty

Gold and Silver thrive on uncertainty, but recent price action suggests exhaustion. Gold neared record highs at $2,880/oz, while Silver tested the critical $32.60 resistance. Both metals have stalled ahead of Friday’s payroll data and ongoing trade war developments.

Technical Analysis: Quantifying Uncertainties

GBPUSD Outlook: Monthly Time Frame – Log Scale

Source: Tradingview

GBPUSD rebounded from October 2023 lows (1.2099) after dropping from 2024 highs (1.3434). The pair remains bullish, but the trendline resistance from 2014-2021 presents a key challenge at 1.2770, 1.2870, and 1.3170. A break below 1.2270 and 1.20 could open the door to 1.17, aligning with the 1.618 Fibonacci extension level based on the corrective pattern between July 2023 (high), October 2023 (low), and September 2024 (high).

Silver Outlook: 3-Day Time Frame – Log Scale

Source: Tradingview

Silver’s rebound from the $28.80 support aligns with a strong trendline supporting price action from May 2024 to January 2025. However, the $32.60 resistance, marking the lower end of Silver’s October 2023–2024 parallel channel, remains a hurdle. A firm close above this level could extend gains to $34.80–35, with further targets at $37 and $40 (Monthly time frame inverted head and shoulders target). On the downside, $30 acts as strong psychological support, with additional levels at $29.70, $28 (May-Jan trendline), and $26.

Written by Razan Hilal, CMT

Follow on X: @Rh_waves

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