GBP/USD, DJIA Outlook: Support Levels Meet Oversold Risks

Rising Federal Reserve rate-hike expectations, higher Treasury yields and renewed dollar strength are increasing downside pressure across markets.

The GBP/USD and Dow Jones charts are now testing defining support levels, while daily momentum indicators point to oversold conditions and potential reversal risks.

Source: CME FedWatch Tool

The probability of a 25-basis-point rate hike at the October meeting has risen above 70%, according to the CME FedWatch Tool. This has supported the U.S. Dollar Index and helped push it back toward its 2026 uptrend near 101.

Although the latest advance has been steep across currency and bond markets, momentum is becoming increasingly stretched. Important technical patterns are also emerging across major charts:

• The dollar and euro are testing daily overbought and oversold conditions last seen in June and near yearly extremes, increasing reversal risks below 101 in the DXY and above 1.13 in EUR/USD.

• GBP/USD is testing support extending from November 2025 near 1.32.

• Gold and silver are testing the boundaries of the July–September advance while maintaining their bullish bias, although that structure is increasingly challenged by the resurgence in Treasury yields and the dollar.

• U.S. indices are experiencing a pullback after the Nasdaq surged by more than 1,000 points this week toward its record highs, while the Dow has extended its decline to 4-month lows.

The broader cross-asset picture is becoming increasingly stretched, with the U.S. 10-year Treasury yield rising toward highs last seen in 2007 and overbought momentum conditions last seen in 2023.

Markets may now be one move away from confirming another wave of distress or reversing the current risk-off pressure.

I go over these charts in my weekly webinars

Register here for the next session

GBP/USD Price Outlook: Weekly Time Frame — Log Scale

 

Source: TradingView

The GBP/USD chart has been trading within a contracting sideways range since November 2025.

The latest dollar rally has pressured the pound toward the lower boundary of this range, near the yearly lows and the 1.32 area.

A close below 1.3200 would expose 1.3100 and the psychological level at 1.3000, increasing the risk of further downside.

However, oversold RSI readings on both the hourly and daily time frames, combined with year-long support, could help trigger a bullish rebound.

A close back above 1.3340 and 1.3400 would help reinstate the short-term bullish bias.

Dow Jones Price Outlook: Daily Time Frame — Log Scale

 

Source: TradingView

From a daily perspective, the Dow Jones is still holding below the uptrend support line that has been in place since the April 2026 lows.

The index is also holding above the 61.8% Fibonacci retracement of the May–August advance near 51,200.

Bearish scenario: A breakdown below 51,200 would target the 78.6% and 100% Fibonacci retracement levels near 50,300 and 49,000, respectively.

A sustained move below these levels would increase the risk of a broader bearish outlook for the year.

Bullish scenario: Reclaiming 51,900, 52,700 and 53,400 would support the continuation of the bullish bias toward 54,000 and the yearly high near 54,800.

These levels are defined using the Fibonacci extension tool applied to the May–August–September wave.

A move above 54,800 would reinforce the uptrend and expose the trendline connecting the higher highs since April 2026, near 57,000.

The Fed’s tone, U.S. Treasury yields and crude oil’s price direction will likely play a key role in shaping the next potential market trends.

Written by Razan Hilal, CMT

Follow on X: @Rh_waves