GBPUSD Holds Rebound, Dow Eyes Record High

Key Events today: US Core PCE, German Inflation
Week Ahead: BOE Rate Decision, US Non-Farm Payrolls, and Evolving Trump policies
Technical Analysis: GBPUSD, DJIA (3-Day Time Frame)

Pound Holds Rebound Above 1.21

Amid oversold conditions, declining inflation, persistent wage growth, and rate cut expectations, the GBPUSD pair has managed to maintain its rebound above 1.21, stabilizing near the 1.24 range. The US dollar remains exposed to inflation risks, especially following Trump’s tariff threats against BRICS nations and labor market risks. Next week’s BOE rate decision, with expectations of a 25-bps rate cut, and the US Non-Farm Payrolls report on Friday, could drive market volatility, influencing the pound’s momentum alongside Trump’s market influence.

Dow Eyes Record Highs

After a steep pullback across global indices, bullish momentum has recharged, setting markets back on track toward record highs. The Dow Jones currently stands at 45,000, just 70 points shy of its all-time high, while the Relative Strength Index (RSI) maintains its bullish rebound. With the Dow near record territory, traders are applying tight risk management, anticipating either a double-top formation or a breakout into another rally. While mega-cap earnings reports delivered mixed results and Trump’s tariff risks persist, the uptrend remains intact.

Technical Analysis: Quantifying Uncertainties

GBPUSD Forecast: 3-Day Time Frame – Log Scale

Source: Tradingview

The GBPUSD pair continues its bullish rebound, holding above the 1.20 support, with a recent low at 1.2099 and high at 1.2520, currently stabilizing near 1.24. The RSI remains below the neutral 50 zone, signaling potential for both reversal and continuation, depending on the following conditions:

Bullish Scenario: A firm close above 1.2520 could extend gains toward 1.2740 and 1.2820, aligning with the trendline connecting lower highs from 2014 to 2021. This resistance level will be critical in determining the pound’s long-term trend.

Bearish Scenario: Given the RSI’s hesitation below 50, key short-term support levels are at 1.23, 1.2260, and 1.21. A break below these levels could extend losses toward 1.17, aligning with the 1.618 Fibonacci extension level, measured from the July 2023 high, October 2023 low, and September 2024 high.

Dow Forecast: 3-Day Time Frame – Log Scale

Source: Tradingview

The Dow Jones is trading near record highs while aligning with the mid-zone of its up trending parallel channel, spanning May 2024 – January 2025. The RSI has re-entered overbought zones on both daily and 4-hour charts.

Bullish Scenario: If the RSI continues its bullish stretch, the Dow may climb toward 46,200 and 47,300, aligning with the upper channel boundaries and the golden 0.618 and 0.786 Fibonacci extension levels, measured from May 2024, December 2024, and January 2025.

Bearish Scenario: If the Dow fails to break higher, a double-top formation may emerge, with key support levels at 43,300, 41,800, and 40,000.

Written by Razan Hilal, CMT

Follow on X: @Rh_waves

You Tube: Commodities and Forex Trading with Razan Hilal

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