**GBP/USD Halts Selloff to Carve Bullish Engulfing Candlestick**
*Adapted and expanded from the original work by Matt Weller, FOREX.com*
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The British pound’s performance against the US dollar reached a key inflection point recently, as GBP/USD managed to halt its persistent selloff and form a bullish engulfing candlestick pattern on the daily charts. This technical formation has caught the eye of FX traders and analysts as it may signal a potential shift in short-term momentum. Further, the evolving macro landscape, shifting Bank of England expectations, and fluctuating risk sentiment are adding depth to the pair’s outlook.
This article delves into the underlying price action, contrasts the recent fundamentals driving GBP/USD, and explores what traders might expect next as the pound attempts to stabilize and perhaps even reverse its recent losses.
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## Summary of Recent GBP/USD Price Action
The GBP/USD currency pair has been at the mercy of both UK-specific economic crosscurrents and the broader macro backdrop dominated by US dollar strength. The following points encapsulate the most relevant aspects of the recent pound-dollar move:
– GBP/USD reached its lowest level since late 2023, falling as low as 1.2600 before buyers stepped in.
– The daily candlestick formation on February 8 produced a notable bullish engulfing candle, often viewed as a reversal signal.
– Volatility remains elevated as traders digest mixed economic data from both the UK and the US, as well as evolving interest rate expectations.
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## Dissecting the Bullish Engulfing Candle
A key catalyst for the change in tone came via the daily price action on Thursday, February 8, 2025. The formation of a bullish engulfing candlestick is important for the following reasons:
– A bullish engulfing candle appears when a session opens below the prior low, only to close above the previous high. This demonstrates aggressive buying activity.
– In candlestick theory, this pattern suggests the downside momentum is waning, and bulls may be ready to retake control.
– The reversal happened around key chart support at 1.2600, where prior reactions occurred in November and December of 2023.
Candlestick patterns are more significant when they coincide with established technical support, as in this case. The question now is whether the bullish reversal attracts follow-through buying, or if it is merely a temporary respite within a broader downtrend.
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## Technical Analysis: Key Support and Resistance Levels
The technical landscape for GBP/USD is nuanced. While the recent candle offers hope for the bulls, several key levels will determine the pair’s path forward:
### Support:
– **1.2600 Region:** Marked the recent swing low and aligns with the uptrend support line from October 2023. This level has repeatedly attracted buyers.
– **1.2500:** Psychological round number and a base from earlier in 2023.
### Resistance:
– **1.2700:** Former support, likely to act as immediate resistance on any retracement.
– **1.2750:** 50-day simple moving average (SMA) and a prior pivot area.
– **1.2800-1.2820:** Zone of horizontal resistance dating back to December, and near the 200-day SMA.
### Additional Technical Considerations:
– The pair remains within a well-defined sideways range between 1.2500 and 1.2820, which has capped price action since October 2023.
– Momentum indicators such as RSI and MACD are beginning to exit oversold territory, which may signal further recovery potential.
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## Macro Drivers: Fundamentals Behind GBP/USD Volatility
While technicals hint at a stabilization, macroeconomic and political factors remain critical in shaping the GBP/USD outlook. Recent drivers include:
### Bank of England Policy Outlook
– The BoE has maintained a relatively hawkish bias compared to its G10 peers, but the market is now pricing in rate cuts by
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