In light of ongoing uncertainty regarding the U.S. government shutdown, labor market weaknesses, and inflation risks stemming from tariffs, Powell’s comments during yesterday’s FOMC meeting, after the decision to cut rates by 25 basis points, emphasized a prudent approach towards a possible rate cut in December, thereby maintaining a bullish outlook for the U.S. Dollar Index. This situation exerted pressure on major currency pairs, prompting EUR/USD and GBP/USD to revisit critical support levels at 1.1570 and 1.3140, respectively. Powell indicates a careful approach regarding a possible December rate cut and suggests a conclusion to quantitative tightening, weighing the softness in the labor market against ongoing inflationary pressures. The advancements in U.S.–China trade relations, coupled with the DXY’s strong performance, have led to a decline in bullish momentum for precious metals.
The GBP/USD pair remains positioned above a significant 6-month support level that has been in place since May 2025. It has encountered resistance at the 1.3800 mark on two occasions, indicating potential double-top risks to the downside or a neutral-to-bullish range to the upside, contingent upon which key level is breached first. Downside scenario – a breach below 1.3140 corresponds with the 0.382 Fibonacci retracement of the upward trend observed from January to July 2025. A decline beneath this threshold may lead to further losses targeting 1.2940, 1.2740, and 1.2670, aligning with the 50% and 0.618 retracement levels.
The Bank of England is observing a decline in inflation, as recent data shows a decrease from 4.0% to 3.8%, while core inflation has also moderated to 3.5%. However, these levels remain significantly above target, indicating that the BOE is likely to maintain a prudent stance as it aims to strike a balance between fostering economic growth and managing inflation. Meanwhile, U.S.–China trade negotiations continue to progress positively, which has not diminished the dollar’s strength but has rather lessened the safe-haven demand for gold and silver, both of which are experiencing short-term bullish relief following a significant sell-off earlier this month.
A consistent hold above 1.3140 may shift gains towards 1.3520, 1.3600, and 1.3800, potentially leading to a bullish breakout that targets the highs observed in 2021 around 1.4200. From a monthly perspective, the identified downside levels could correspond with the upper boundary of a prolonged consolidation that has persisted since the 2008 peaks. This may lead to a continuation of the long-term upward trend, unless another decline within the consolidation range takes place. The monthly chart reveals significant historical peaks from 2018 to 2021, specifically at 1.4200 and 1.4400. These levels may become relevant again if the British Pound manages to close above its 2025 highs.