GBP/USD Halts Selloff to Carve Bullish Engulfing Candlestick

US Dollar Outlook: GBP/USD

GBP/USD bounces back from a fresh weekly low (1.2333) to halt a three-day selloff, and the exchange rate may attempt to retrace the decline from the monthly high (1.2550) as it seems to be carving a bullish engulfing candlestick formation.

GBP/USD Halts Selloff to Carve Bullish Engulfing Candlestick

GBP/USD retraces the decline from the start of the week as Federal Reserve Jerome Powell tells US lawmakers that ‘we do not need to be in a hurry to adjust our policy stance’, and it seems as though the Federal Open Market Committee (FOMC) will gradually move towards a neutral stance despite the ongoing change in US trade policy.

Join David Song for the Weekly Fundamental Market Outlook webinar.

In turn, the US Dollar may face headwinds ahead of the next Fed meeting in March as the central bank appears to be on track to implement lower interest rates in 2025, and data prints coming out of the US may fuel the recent rebound in GBP/USD as the Consumer Price Index (CPI) is anticipated to show easing inflation.

US Economic Calendar

Even though the headline CPI is seen holding steady at 2.9% in January, the core rate is expected to narrow to 3.1% from 3.2% per annum the month prior, and indications of slowing price growth may produce a bearish reaction in the US Dollar as it fuels speculation for an imminent Fed rate-cut.

However, a higher-than-expected CPI print may push the FOMC to further combat inflation, and signs of persistent price growth may curb the recent rebound in GBP/USD as it raises the central bank’s scope to keep US interest rates on hold.

With that said, GBP/USD may continue to track the negative slope in the 50-Day SMA (1.2485) amid the failed attempt to close above the moving average, but the exchange rate may stage further attempts to test the January high (1.2576) should it push above the opening range for February.

GBP/USD Price Chart –Daily

Chart Prepared by David Song, Senior Strategist; GBP/USD on TradingView

A bullish engulfing candlestick formation takes shape as GBP/USD climbs to a fresh weekly high (1.2430), with a break/close above the 1.2390 (38.2% Fibonacci extension) to 1.2446 (May low) zone bringing the monthly high (1.2550) on the radar.
A breach above the January high (1.2576) opens up the 1.2710 (23.6% Fibonacci extension) to 1.2760 (61.8% Fibonacci retracement) region, but lack of momentum to break/close above the 1.2390 (38.2% Fibonacci extension) to 1.2446 (May low) zone may keep GBP/USD below the 50-Day SMA (1.2485).
Failure to hold above the 1.2300 (50% Fibonacci retracement) to 1.2310 (61.8% Fibonacci extension) region may push GBP/USD towards the monthly low (1.2249), with the next area of interest coming in around the January low (1.2100).

Additional Market Outlooks

USD/JPY Rebound Keeps RSI Above Oversold Zone Ahead of Fed Testimony

Canadian Dollar Forecast: USD/CAD Remains Susceptible to Trump Tariffs

GBP/USD Vulnerable amid Failure to Close Above 50-Day SMA

AUD/USD Recovery Stalls Ahead of January High

--- Written by David Song, Senior Strategist

Follow on Twitter at @DavidJSong

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 70% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. CFD and Forex Trading are leveraged products and your capital is at risk. They may not be suitable for everyone. Please ensure you fully understand the risks involved by reading our full risk warning.

City Index is a trading name of StoneX Financial Ltd. Head and Registered Office: 1st Floor, Moor House, 120 London Wall, London, EC2Y 5ET. StoneX Financial Ltd is a company registered in England and Wales, number: 05616586. Authorised and regulated by the Financial Conduct Authority. FCA Register Number: 446717.

City Index is a trademark of StoneX Financial Ltd.

The information on this website is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement.