Key Events
- Powell signals caution toward a potential December rate cut and hints at the end of quantitative tightening (QT), balancing labor market weakness against persistent inflation.
- U.S.–China trade progress and the DXY’s bullish hold have reduced bullish momentum in precious metals.
- GBPUSD holds above 6-month support at 1.3140
Amid continued uncertainty surrounding the U.S. government shutdown, weakness in the labor market, and tariff-induced inflation risks, Powell’s remarks during yesterday’s FOMC meeting, following the 25 bps rate cut decision, reinforced a cautious stance on a potential rate cut in December, keeping the U.S. Dollar Index (DXY) on a bullish footing. This pressured major currency pairs, including EURUSD and GBPUSD, to retest key support levels at 1.1570 and 1.3140, respectively.
As for the Bank of England (BOE), inflation is cooling, with the latest figures dropping from 4.0% to 3.8% and core inflation easing to 3.5%. However, these levels remain well above target, suggesting a continued cautious approach by the BOE as it seeks to balance stimulating economic growth and controlling inflation.
Meanwhile, U.S.–China trade negotiations remain on a constructive track, which has not weakened the dollar’s strength but has instead reduced haven demand for gold and silver, both showing short-term bullish relief after a steep sell-off earlier this month.
Technical Analysis: Quantifying Uncertainties
GBPUSD Outlook: 3-Day Time Frame – Log Scale
Source: Trading view
The GBPUSD pair is holding above a critical 6-month support level extending from May 2025, after failing twice to break above the 1.3800 mark — signaling potential double-top risks to the downside or a neutral-to-bullish range to the upside, depending on which key level breaks first.
Downside scenario – a breaking below 1.3140:
- 6-month support since May 2025.
- Aligns with the 0.382 Fibonacci retracement of the uptrend between January and July 2025.
A break below this level could extend losses toward 1.2940, 1.2740, and 1.2670, corresponding with the 50% and 0.618 retracement levels.
Upside scenario:
A sustained hold above 1.3140 could redirect gains toward 1.3520, 1.3600, and 1.3800, after which a bullish breakout may develop, targeting highs last seen in 2021 near 1.4200.
GBPUSD Outlook: Monthly Time Frame – Log Scale
Source: Trading view
From a monthly perspective, the defined downside levels may align with the upper boundary of a long-term consolidation that has extended since the 2008 highs.
This could precede a resumption of the long-term uptrend, unless another dip within the consolidation range occurs.
The monthly chart also highlights historical peaks between 2018 and 2021 — at 1.4200 and 1.4400 — which could once again come into play should the British Pound close above its 2025 highs.
Written by Razan Hilal, CMT
Follow on X: @Rh_waves
