Breaking Down the Charts: GBP, USD, BTC and GOLD

As we step into a very crucial economic week, we are expecting the release of the FOMC statement and Bank of England report. The Feds are faced with a lot of challenges, like the heightened trade wars, rising inflation, and they must factor in the risk involved, while the BOE is torn between cutting interest rates despite growing inflation.

The Fed’s decision this week can shape the entire landscape of the markets for the remainder of the year. Traders should expect a very volatile week. This report will dive deep into the various risks and drivers that are crucial in determining market directions this week.

BoE vs. BoJ Policy

The BoJ’s ultra-dovish stance (negative rates) contrasts with the BoE’s slower rate cuts, keeping GBP/JPY bids alive. The Bank of Japan has remained very cautious as it has raised its rates once in the last 10 years, and this has made the economy one of the few with negative rates. Over the years, we have seen the Japanese economy stabilize and have inflation stay well above the target, and this has been identified as being driven by external factors. The BOJ president is looking to increase wages. All of these factors have kept the Japanese Yen (JPY) under selling pressure. On the other hand, we have rising inflation in the UK, and this has made the BOE more cautious about cutting interest rates. This makes investor sentiment drive towards a bullish GBP over JPY. This pair is highly influenced by policies and macros and keeps the GBP bullish.

USD Weakness

A dovish Fed could lift GBP/USD and BTC, while gold benefits from de-dollarization. Over the next few weeks we can potentially see a vulnerable USD could spark a rally in GBP/USD and Gold. The dollar has been hit by risk sentiments and capital flows lately. The rates have increased to over 5%, and this has shown signs of easing inflation. We can also slowly see growth increase, and all this has been caused by a dovish Fed. All of these implications continue to undermine the USD.

A number of factors continue to back a rally in Gold as it always thrives when the USD is de-dollarized. The CBNs have been focused on buying gold instead of US reserves. Whenever there are geopolitical risks, there is also an increase in safe-haven assets like Gold. Bitcoin also thrives on weak USD and a few catalysts support this as BTC has been widely believed to be an alternative store of value over fiat, also declining rates and yields give room to a bullish BTC sentiment.

Monetary Policy Divergence

The BoE is expected to cut rates more slowly than the Fed, supporting GBP. However, recent dovish signals hint at potential H1 2025 cuts, weighing on the pound. The Pound has been heavily driven by monetary policy divergence. The BoE has been slow to cut rates, and this has helped the GBP find support. The policies have been conservative with cutting rates, and this looks to continue if inflation keeps falling.

Central Banks: BoE/Fed divergence and BoJ’s inertia

The BoE has been very cautious about rate cuts despite the fact that inflation in the UK remains shaky. While in the US, the Feds have been gradually cutting rates, and this has impacted the GBP/USD market as we see it in a bouncing range with upward potential. If the BoE remains more hawkish than the Fed, we could potentially see more upside movement for GBP/USD. Meanwhile, all indications continue to back a bullish GBP/JPY as the yen has been structurally weak. 

Technical Analysis using Price Action

GBPJPY 

Price action review : 

GBPJPY still exhibits a bullish price action with the last weekly candle closing above the 191.7 resistance level, which aligns with both fundamental and technical confirmations. Price has successfully bounced off the 185.0 support level and is starting to form higher highs and higher lows. Price still remains in a range, and a break above the 196.0 level would confirm buys for new highs.
Key Levels:

Bullish Scenario

• Price still remains in an upper bias, and we would continue to seek buys into 195.8.
• A break and retest of 196.0, as well as a breakout of the ranging triangle, would confirm more buys toward the 200.0 psychological level.

GBPUSD 

Price action review : 

The GBP/USD pair is currently trading at 1.32858, forming a bullish ascending flag as a confirmation for buying momentum. The pair has been consolidating above 1.3260 and forming a range, reflecting cautious sentiment ahead of key economic events, including the Bank of England (BoE) and Federal Reserve policy decisions.

Key Levels:

Bullish Scenario

• Price is forming an ascending flag, and we would continue to look for buying options once the price sits above 1.32.
• Price also sits at Fibonacci level 23.6 after price broke and retested the resistance level 1.32.
• A breakout of resistance 1.345 would confirm buying pressure.

BTCUSD

Price action review : 

The price declined from the psychological level of $98,000 this week. As traders anticipate the Fed’s announcement later this week, buying pressure has reduced, and we could see a potential correction before the meeting.

Key Levels:

Bearish Scenario

• Price has been rejected at the psychological level of 98,000.
• If price successfully breaks out of bullish change, we can anticipate more sells to 89,000. 

XAUUSD

Price action review : 

Gold has been in correction form after rallying to a new ATH of $3,500 , price has completed the A,B,C correction model , and we can potentially start to look for short term buys gradually. The price action reflects a tug-of-war between bullish technical support and bearish fundamental pressures.

Key Levels:

Bullish Scenario

• Price is gradually forming higher highs and higher lows. 
• Buyers are starting to return to the market.
• We can get short-term buys to $3300.
• The next target level would be $3380.

Key Takeaways for Traders

1. GBP Pairs: Watch BoE rhetoric and USD momentum. GBP/JPY favors bulls if 193.75 breaks; GBP/USD needs 1.3445 for reversal.
2. Gold: Short-term bearish, but $2,955 is a make-or-break level for long-term bulls.
3. Bitcoin: Short-term sells are likely to reach $90,000 before we can potentially find buys