US Debt Concerns Stall GBPUSD at Key Resistance, Dow at Critical Support

Key Events

U.S. bond yields surge on Trump tax cut plans and rising debt concerns
30- and 40-year Japanese bond yields climb to record levels
DXY weakens, dipping near key levels as the Dow holds above major support
UK Flash PMIs mixed: Services improve above 50, while manufacturing slumps to 45.1

Mounting concerns over U.S. debt levels continue to weigh on the U.S. dollar, propelling major currencies toward 2025 highs, lifting haven assets back on a bullish track, and pushing indices to pivotal support zones—caught between bearish pressure and bullish potential.

Despite attempts by the Trump administration to reassure markets with long-term growth narratives, recent policy proposals—such as the latest tax cut plan—raise concerns. According to the Tax Foundation, the proposed cuts could reduce federal revenue by $4.5 trillion between 2025 and 2034, despite spending reductions across Medicaid, green energy, and higher education programs.

If optimism returns to headlines, indices may resume their upward trajectory toward record levels, while the dollar could rebound above the 100 and 102 levels, shifting the current narrative of dollar weakness and 2025 currency highs in the second half of the year.

Technical Analysis

GBPUSD Outlook: 3-Day Time Frame – Log Scale

Source: Tradingview

Supported by stronger-than-expected UK data and a surge in inflation near one-year highs, GBP/USD is testing 2024 highs near the 1.3450 level. Although the pair briefly breached this resistance, a clear and sustained close above is required to confirm bullish continuation toward 2021 highs at 1.3750 and 1.4230.

If resistance holds—aligned with overbought conditions similar to those seen in 2024, 2023, and 2021—the pair could pull back toward 1.3230, 1.3150, and 1.3090. If bearish pressure intensifies, a deeper retreat toward the 1.2930 zone remains possible.

Dow Outlook: Weekly Time Frame – Log Scale

Source: Tradingview

The Dow currently sits at the neckline of a respected double-top pattern, extending from December 2024 to February 2025. This consolidation mirrors the RSI's retracement to the upper edge of the 50-neutral zone, setting the stage for a potential breakout continuation.

Markets are holding at critical levels, awaiting fundamental confirmation for a more optimistic economic outlook. A move above 43,000 could open the door toward 44,000 and 44,800, aligning with the broader bull rally toward new record highs. However, a break below 41,800 would shift focus to 41,500 and 40,900 as next key support levels.

Written by: Razan Hilal, CMT

Follow on X: @Rh_waves

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