Technical Analysis

GBP/USD Price Analysis – Jan 29, 2025

By LHFX Technical Analysis
Jan 29, 20254 min
Gbpusd

Daily Price Outlook

During the European trading session, the GBP/USD currency pair faced slight decline, edged lower around 1.2430. This drop came as the US Dollar (USD) regained some strength ahead of the Federal Reserve’s (Fed) upcoming monetary policy decision, which is set to be announced at 19:00 GMT.

Despite this dip against the US Dollar, the Pound (GBP) performed well against most other major currencies. The Pound's positive movement came after UK Prime Minister Keir Starmer spoke about improving trade relations with the United States.

Despite the GBP/USD pair faced some pressure from the US Dollar’s recovery, the overall sentiment for the Pound remained upbeat, especially with signs of stronger economic cooperation between the UK and the US. The market will be keeping a close eye on the Fed's decision later today for further direction.

GBP Strengthens Amid Optimism Over UK-US Trade and Economic Growth Prospects

On the GBP front, the Pound Sterling (GBP) has been gaining traction against most major currencies, except safe-haven ones like the US Dollar (USD) and Japanese Yen (JPY). This rise comes after UK Prime Minister Keir Starmer made optimistic comments about improving trade relations with the United States.

In an interview with Bloomberg, he mentioned that the UK already has a “huge amount of trade” with the US, and there’s potential for even “better trading relations” in the future. His words helped ease concerns that the UK might face heavy tariff threats from former President Trump.

Starmer’s positive outlook on trade and the UK economy has also sparked some optimism. He stated that the government’s main priority is economic “growth” and that the UK economy is on the verge of a “turnaround.”

Investors are now looking for further signs of economic recovery, especially after Chancellor of the Exchequer Rachel Reeves' speech in Oxfordshire on Wednesday. She is expected to announce plans for the Oxford-Cambridge Growth Corridor, which could potentially add £78 billion to the UK economy by 2035.

Looking ahead, traders are also anticipating changes in monetary policy. Many believe the Bank of England (BoE) will cut interest rates by 25 basis points to 4.5% at its upcoming meeting on February 6.

This expectation comes after slower-than-expected UK inflation and a surprising drop in Retail Sales in December. Additionally, labor demand has cooled due to increased National Insurance contributions for employers, which may further support the case for rate cuts.

US Dollar Strengthens Ahead of Fed Decision and Trade Policy Developments

On the US front, the broad-based US Dollar is gaining strength ahead of the Federal Reserve’s (Fed) upcoming monetary policy decision, which will be announced at 19:00 GMT. The US Dollar Index (DXY), which tracks the USD against six major currencies, is bouncing back toward the 108.00 level.

Traders expect the Fed to pause its recent policy easing and keep interest rates unchanged at 4.25%-4.50%, based on the CME FedWatch tool.

In addition, investors are keeping an eye on President Trump’s trade policies. White House Press Secretary Karoline Leavitt confirmed that the 25% tariffs on Canada and Mexico, effective February 1, are still in place, and Trump is considering additional tariffs on China.

He also plans to impose tariffs on pharmaceuticals, advanced chips, and steel to boost US manufacturing. Therefore, the US Dollar’s strength, driven by Fed expectations and trade policies, is likely to weigh on the GBP/USD pair, pushing the GBP lower as USD gains traction against it. (edited)

GBP/USD Price Chart - Source: Tradingview
GBP/USD Price Chart - Source: Tradingview

GBP/USD – Technical Analysis

The GBP/USD pair is extending its gains, trading at $1.24555, up 0.13%, as it tests key technical levels. The pair remains above the pivot point at $1.24239, signaling a potential bullish continuation.

The 50-day EMA at $1.24238 serves as near-term support, reinforcing the upward trend. If buyers maintain control, the next resistance levels stand at $1.25064, followed by $1.25637 and $1.26131.

A sustained move above $1.24232 supports further gains, with a breakout above $1.25064 likely triggering additional upside momentum.

However, failure to hold above the pivot could expose the pair to immediate support at $1.23777, with deeper pullbacks toward $1.23016 and $1.22461 if selling pressure intensifies.

Macroeconomic factors, including U.S. economic data and Bank of England policy expectations, will play a crucial role in shaping the near-term direction.

If the U.S. dollar weakens on dovish Federal Reserve signals, GBP/USD could continue climbing. Conversely, stronger U.S. data could stall the rally.

Traders may consider a buy position above $1.24232, targeting $1.25069, with a stop-loss at $1.23777 to manage downside risks.

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GBP/USD

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