GBPUSD Weekly Analysis 25/01/2025

Fundamental Analysis
The GBP/USD pair has recently rallied, buoyed by stronger-than-expected UK Manufacturing and Services PMI reports. The Composite PMI edged up to 50.9 in January from 50.4 in December, indicating modest economic growth.

However, underlying economic challenges persist. Businesses are shedding jobs at the fastest rate since 2009, excluding the pandemic period, due to increased employer national insurance contributions and a decline in business optimism.

Inflationary pressures are also resurfacing, with private sector firms raising prices at the quickest pace in 18 months, complicating the Bank of England's monetary policy decisions.

While the recent PMI data has provided a boost to the pound, the broader economic landscape suggests that the GBP/USD rally may face headwinds from ongoing structural challenges in the UK economy.

2. Key Support Levels

• 1.2292, 1.2228 & 1.2161 (H4 Liquidity):

  • High liquidity zones; monitor for sweeps and reversal patterns like bullish engulfing or pin bars.

• 1.2306 (Weekly FVG):

  • Critical confluence zone with higher timeframe demand. Ideal for long opportunities.

3. Long Opportunities

• 1.2292, 1.2228 & 1.2161 (H4 Liquidity):

  • These levels are significant liquidity zones.

  • Look for bullish reversal patterns, such as bullish engulfing candles or pin bars, for confirmation.

• 1.2306 (Weekly Fair Value Gap):

  • Strong confluence with higher timeframe demand.

  • Enter long positions with stops below this zone, targeting higher levels.

Targets

• Primary Target: 1.2575 (Daily Liquidity):

  • Anticipate a liquidity grab here. Partial profit-taking is recommended.

• Extended Target: 1.2607 (Daily Liquidity):

  • If bullish momentum continues, this level offers an ideal zone for further gains.

4. Short Opportunities

• 1.2575, 1.2607 (Daily Liquidity):

  • Monitor for signs of exhaustion, such as a liquidity grab or bearish reversal patterns (e.g., bearish engulfing or shooting star) on the H4 or daily chart.

• Targets:

  • Primary Target: 1.2375 (Daily FVG):

    • This level aligns with minor liquidity and could act as a first target for profit-taking.

  • Secondary Target: 1.2292 (H4 Liquidity):

    • A key support zone where buyers may re-enter. Consider securing most of the profits here.

5. Summary

• With bullish momentum intact, GBP/USD has strong potential to reach 1.2575 and extend toward 1.2607 if support zones hold and confirmation signals align.

1.2575, 1.2607 (Daily Liquidity):

• A potential rejection zone where liquidity grabs may occur.

• Look for bearish reversal signals (e.g., bearish engulfing, shooting star) on the H4 or daily chart to validate shorts.

• Use your strict money management rules to manage risks effectively.

Technical analysis

1. Overview of Momentum and Market Structure

• Current Momentum: Bullish.

• Last Week’s Performance: Rebounded strongly after a prolonged decline.

• Range: 1.2099–1.2501.

• Expectation: A bullish continuation within the range, with potential for new highs.