empty
14.01.2025 03:14 AM
GBP/USD Overview: January 14 – The Pound Continues to Sink Like a Stone to the Bottom of the Mariana Trench

This image is no longer relevant

The GBP/USD currency pair experienced a decline on Monday, which was expected. Over the past five trading days, the British pound has lost 450 pips, and in the last three months, it has dropped by 1,300 pips. We still believe that this is not the bottom for the pound. When we look at the weekly timeframe, it becomes evident why we anticipate this scenario. The last segment of the 16-year downtrend ended around 1.0350. At that time, many believed this marked the worst for the pound and that it couldn't fall any further. However, a new phase of the global trend may have commenced three months ago. If this is true, the decline should continue, at least until parity.

On the daily timeframe, the situation for the British currency is similarly bleak. A three-month collapse persists, with no signs of correction, as the pound continues to fall even on days devoid of local reasons. Yet, the global fundamentals and market dynamics remain firmly in place. Let's clarify what we mean by that. The global fundamental backdrop includes the monetary policies of the Federal Reserve and the Bank of England, as well as the economic conditions in the U.S. and the UK. Regarding the latter, there are unlikely to be any questions: the U.S. economy is clearly stronger and is growing at a much faster pace. In fact, any economy growing at rates "greater than zero" is outpacing the UK, which is experiencing near-stagnation.

The Fed's monetary policy is expected to be more hawkish than previously anticipated, while the Bank of England is likely to adopt a dovish stance in an effort to stimulate the economy. However, the most notable aspect is that since September 2022, the market has sold off the dollar, prematurely pricing in Fed easing while largely ignoring potential moves by the Bank of England. It is now evident that the Fed plans to implement only two rate cuts in 2025, and even those are not guaranteed. This suggests that most global factors are supportive of the dollar. Additionally, Donald Trump's potential return to the presidency could further strengthen the dollar. The market has miscalculated, incorrectly anticipating dovish actions from the Fed.

Currently, the market needs to "rebalance" the exchange rate to reflect its fair value, considering Trump's inflationary policies and the Bank of England's plans for easing. The persistent 16-year downtrend indicates that we are just at the beginning of the next leg. We believe the British pound will continue to decline over an extended period. Of course, if the underlying conditions change, we will adjust our forecasts accordingly. Within the prevailing trend, there will likely be corrections—possibly even significant ones. However, our overall outlook remains unchanged: we see no reason for the pound to appreciate. The only question is when the market will start to partially lock in profits on short positions.

This image is no longer relevant

The average volatility of the GBP/USD pair over the last five trading days is 128 pips, which is considered high for this pair. On Tuesday, January 14, we expect the pair to trade within a range of 1.2035 to 1.2291. The higher linear regression channel is oriented downward, indicating a continuing downtrend. The CCI indicator has once again entered the oversold zone; however, oversold conditions during a downtrend typically signal only a potential correction. A bullish divergence in the indicator suggested a correction, which has now been completed.

Nearest Support Levels

  • S1: 1.2085
  • S2: 1.1963
  • S3: 1.1841

Nearest Resistance Levels

  • R1: 1.2207
  • R2: 1.2329
  • R3: 1.2451

Trading Recommendations:

The GBP/USD pair remains in a downtrend. Long positions are not currently recommended, as we believe that all factors supporting the British currency have already been factored into the market several times, and there are no new driving forces present. For traders focusing solely on technical analysis, long positions might be considered if the price rises above the moving average, with target levels at 1.2451 and 1.2573. However, short positions are still far more relevant, with target levels at 1.2035 and 1.1963.

Explanation of Illustrations:

Linear Regression Channels help determine the current trend. If both channels are aligned, it indicates a strong trend.

Moving Average Line (settings: 20,0, smoothed) defines the short-term trend and guides the trading direction.

Murray Levels act as target levels for movements and corrections.

Volatility Levels (red lines) represent the likely price range for the pair over the next 24 hours based on current volatility readings.

CCI Indicator: If it enters the oversold region (below -250) or overbought region (above +250), it signals an impending trend reversal in the opposite direction.

Paolo Greco,
Analytical expert of InstaForex
© 2007-2025
Select timeframe
5
min
15
min
30
min
1
hour
4
hours
1
day
1
week
Earn on cryptocurrency rate changes with InstaForex
Download MetaTrader 4 and open your first trade
  • Grand Choice
    Contest by
    InstaForex
    InstaForex always strives to help you
    fulfill your biggest dreams.
    JOIN CONTEST

Recommended Stories

Overview of the GBP/USD Pair on January 21: The Pound Clings to a Straw

The GBP/USD currency pair experienced growth on Monday, coinciding with the start of the U.S. trading session. It's important to note that this growth did not stem from any specific

Paolo Greco 05:19 2025-01-21 UTC+2

Overview of the EUR/USD Pair on January 21: Trump's Inauguration Changes Nothing

The EUR/USD pair traded relatively calmly on Monday, at least during the first half of the day. However, with the opening of the U.S. session, volatility surged sharply. The subsequent

Paolo Greco 05:19 2025-01-21 UTC+2

EUR/USD: The Illusion Bubble – Dollar Weakens Amid Strengthened Risk Sentiment

Markets are optimistic ahead of Donald Trump's inauguration. Increased risk appetite has allowed EUR/USD buyers to recover from Friday's lows, with the pair now trading above the 1.0300 target

Irina Manzenko 23:40 2025-01-20 UTC+2

USD/CAD: Analysis and Forecast

The USD/CAD pair retreated slightly after reaching its highest level since March 2020 during the Asian session on Monday, amid a modestly weaker US dollar. However, this pullback

Irina Yanina 13:23 2025-01-20 UTC+2

The Market Finds Shelter

The S&P 500 achieved its best weekly performance since the November U.S. presidential election, just before Donald Trump's inauguration. Initially, investors worried that his protectionist policies could negatively impact

Marek Petkovich 08:02 2025-01-20 UTC+2

EUR/USD Weekly Preview: Trump's Inauguration, Lagarde's Speech, ZEW and PMI Indices

The economic calendar for the upcoming week is not packed with significant events. Key reports for EUR/USD (Nonfarm Payrolls, CPI, PPI) were released in the first half of January, while

Irina Manzenko 05:24 2025-01-20 UTC+2

Overview of the GBP/USD Pair on January 20: The Fairy Tale Is Over, but There Was Never a Fairy Tale

On Friday, the GBP/USD currency pair experienced another decline. Among the macroeconomic data released that day, one notable highlight was yet another disappointing data from the UK. Although

Paolo Greco 04:46 2025-01-20 UTC+2

Overview of the EUR/USD Pair on January 20: The Euro Prepares for a New Decline

The EUR/USD pair continued its gradual decline on Friday. We have consistently pointed out that the euro has no reasons to rise, and this remains true. Our scenario and forecast

Paolo Greco 04:46 2025-01-20 UTC+2

Fresh news on gas market situation

The gas market is experiencing significant and steady growth, which is not surprising given recent events. According to recent reports, after the outgoing Biden administration introduced several sanctions against Gazprom

Miroslaw Bawulski 13:37 2025-01-17 UTC+2

USD/JPY: Analysis and Forecast

The Japanese yen is declining, giving up part of its strong weekly gains against the US dollar. The ceasefire agreement between Israel and Hamas, along with a positive sentiment

Irina Yanina 11:35 2025-01-17 UTC+2
Can't speak right now?
Ask your question in the chat.
Widget callback
 

Dear visitor,

Your IP address shows that you are currently located in the USA. If you are a resident of the United States, you are prohibited from using the services of InstaFintech Group including online trading, online transfers, deposit/withdrawal of funds, etc.

If you think you are seeing this message by mistake and your location is not the US, kindly proceed to the website. Otherwise, you must leave the website in order to comply with government restrictions.

Why does your IP address show your location as the USA?

  • - you are using a VPN provided by a hosting company based in the United States;
  • - your IP does not have proper WHOIS records;
  • - an error occurred in the WHOIS geolocation database.

Please confirm whether you are a US resident or not by clicking the relevant button below. If you choose the wrong option, being a US resident, you will not be able to open an account with InstaForex anyway.

We are sorry for any inconvenience caused by this message.