The GBP/USD currency pair mirrored the decline of the EUR/USD on Tuesday. As noted in previous analyses, the dollar's drop on Monday lacked a fundamental basis, and a correction was anticipated. It's important to highlight that we do not create justifications for every market movement. There are times when price fluctuations occur without any tangible reasons. Markets can respond independently of fundamentals or macroeconomic factors, which means that instruments may move without clear explanations. However, there is often some underlying logic, even if it's not immediately apparent. On Monday, that logic seemed to be absent, and we avoid assigning unrelated news as the cause of market movements after the fact. How many accurately predicted the dollar's 150-pip drop on Monday? Virtually none. Notably, Donald Trump did not disclose anything particularly groundbreaking.

The British pound continues to face challenges, with blame being directed elsewhere rather than towards Trump. It's important to note that the decline of the pound (similar to that of the euro) began in September 2024, following the Federal Reserve's first interest rate cut. We highlighted the potential for this situation earlier and now want to emphasize that the 16-year global downtrend remains intact. This trend is downward, and while corrections may occur, they are typically followed by a return to the prevailing trend. Unless this global downtrend is reversed, the overall expectation should remain bearish.

In the short term—over the course of a day or a week—the British pound may experience occasional rallies. These fluctuations do not require significant justification; for example, a market decision to close some short positions can easily lead to a temporary recovery. However, even these rallies are becoming increasingly challenging for the pound. On Tuesday, the UK released a new set of economic data. Before analyzing the latest reports, it's important to remember that last week's UK data did not provide any compelling reasons for the market to invest in the pound.

Recent reports revealed that the unemployment rate unexpectedly increased, contrary to forecasts. Wages, on the other hand, showed an upward trend. While the report regarding the number of unemployed individuals provided some optimism for pound sterling supporters, the unemployment rate is generally regarded as a more significant indicator. This weighty factor contributed to the pound sterling's rise, which was unexpected on Monday but was anticipated to decline on Tuesday.

The bottom line is that we have Donald Trump, who will likely make loud and shocking statements every day, along with the Fed, the Bank of England, and the current state of the US and UK economies. These five factors will determine the fate of the GBP/USD pair. The last four factors support the dollar, while the first factor suggests that the market will soon adapt to Trump's promises and statements, becoming less reactive to them. Trump's name will undoubtedly continue to appear in headlines for the next four years, but it's important to interpret his words with caution—perhaps dividing their impact by eight, or even sixteen. Therefore, at this moment, nothing significant has changed for the dollar.

The average volatility of the GBP/USD pair over the last five trading days is 119 pips, which is considered "high" for this pair. On Wednesday, January 22, we expect the pair to move between 1.2197 and 1.2435. The higher linear regression channel remains downward, signaling a bearish trend. The CCI indicator has re-entered the oversold zone, which, on a downtrend, typically indicates a corrective move. A new bullish divergence in this indicator again suggests a correction may be underway.

Closest Support Levels:

• S1: 1.2268
• S2: 1.2207
• S3: 1.2146

Closest Resistance Levels:

• R1: 1.2329
• R2: 1.2390
• R3: 1.2451

Trading Recommendations:

The GBP/USD pair continues to exhibit a bearish trend. Long positions may not be favorable, as the market has already priced in all the factors supporting the pound, with no new developments emerging. However, if trading based solely on technical signals, long positions could be considered if the price rises above the moving average line, targeting levels of 1.2390 and 1.2435. On the other hand, short positions remain more relevant, with targets set at 1.2197 and 1.2146. For these short positions to be valid, the pair must reestablish itself below the moving average line.

Explanation of Illustrations:

Linear Regression Channels help determine the current trend. If both channels are aligned, it indicates a strong trend.

Moving Average Line (settings: 20,0, smoothed) defines the short-term trend and guides the trading direction.

Murray Levels act as target levels for movements and corrections.

Volatility Levels (red lines) represent the likely price range for the pair over the next 24 hours based on current volatility readings.

CCI Indicator: If it enters the oversold region (below -250) or overbought region (above +250), it signals an impending trend reversal in the opposite direction.