Key Events
• Flash manufacturing and services PMI on Friday are expected to add volatility risks to GBPUSD and USDCAD following the rise and fall of diplomatic tensions between the US and the EU/UK.
• The removal of February 1 tariff threats lifted markets back toward key resistance levels and held the dollar at a stable ground. While gold remains elevated and eyeing the 5,000-threshold, caution remains warranted before any broader momentum recharge and the resumption of primary bull runs.
Sentiment has returned to neutral after leaning bearish on dollar pairs and risk assets, following Trump’s positive remarks on the US economy. He highlighted the impact of tax reductions, tariff income, rising 401k retirement valuations driven by the stock market surge, and overall US economic growth at +4.3%, according to the latest GDP figures. These comments helped restore investor confidence and bullish speculation, lifting US dollar pairs from key support levels and capping gains across major pairs, with:
• EURUSD pulling back from the 1.1770 high to the 1.17 area
• USDCAD recovering from 1.3780 to 1.3820
• The DXY holding in the 98 price zone
GBPUSD Outlook – Weekly Time Frame – Log Scale
Source: Trading view
The extended consolidation on the GBPUSD chart since 2023 is facing another test after pulling back from resistance connecting higher highs between July 2023 and September 2024 above the 1.30 price zone.
The latest rebound from the 1.30 zone is tracing a potential flag pattern, in line with the weekly RSI holding above the 50 neutral level, suggesting a bullish bias. A clean hold above the 1.3570 mark would confirm this pattern and extend gains toward the 2+ year resistance at 1.38, before confirming a longer-term bullish continuation breakout toward highs last seen in 2021 near 1.42.
On the downside, key support holds at 1.33. A break below this level would invalidate the bullish continuation pattern and drag price action back toward the 1.30–1.2940 price zone. A steeper drop is expected to emerge with a clean hold below 1.2940, targeting 1.2740 and 1.2480 respectively.
USDCAD Outlook: Daily Time Frame – Log Scale
Source: Trading view
In line with the major double-top formation traced on the USDCAD chart in November 2025, a smaller double-top recently formed following the US–EU tariff escalations. Recent price action is rebounding from the pattern target at 1.3780 as diplomatic tensions ease.
However, amid mixed sentiment and a cautious outlook driven by gold’s persistent strength, the rebound remains fragile until a clear hold above the 1.3880 mark. The daily RSI is dipping back below the 50 neutral barrier, following its own double-top formation, calling for confirmation of the pair’s rebound.
On the downside, should the pair close back below the 1.3780 mark, losses are expected to extend toward the December 2025 lows at 1.3670, and in more extreme scenarios toward the June 2025 low at 1.3540.
Written by Razan Hilal, CMT
Follow on X: @Rh_waves
