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17.02.202604:03 Forex Analysis & Reviews: Overview of the GBP/USD Pair. February 17. Has the Market Fallen Asleep?

The GBP/USD currency pair also showed absolutely no interesting movements on Monday. The analysis of the pair should start with the fact that volatility has once again declined. After quite an active second half of January, the market is quiet again. The British pound has been moving more sideways than up or down over the past week. This is despite a series of major reports from across the ocean and some important data from the UK.

In the EUR/USD article, we already analyzed the Non-Farm Payroll and unemployment reports. We concluded that the market simply ignored them, as there was neither serious nor logical movement. Now we need to address the inflation report, which was also effectively ignored and completely undeservedly so. U.S. inflation has slowed to 2.4%. Remember that with the same inflation rate, the European Central Bank actively cut interest rates, while the Bank of England is on the verge of new monetary policy easing amid higher inflation. What is the Federal Reserve waiting for? A negative consumer price index?

However, the problem is not with the Fed. Jerome Powell and his colleagues, who have not yet lost independence from Congress and the White House, repeatedly state that the central bank's decisions on the key rate are entirely dependent on macroeconomic data. On what basis, then, is the conclusion made about the Fed's hesitation to ease policy further? Based on the expectations of the market itself. There is an instrument called CME FedWatch that reflects the probability of an interest rate cut over the next 15 meetings. Many analysts and traders look to this tool. What does it tell us?

It currently indicates a 8% probability of a rate cut on March 18. On April 29, it is 25%. But how accurate is this indicator, and should conclusions be drawn based on it? It is worth noting that this tool utilizes the opinions of various investors, economists, and other market participants. Simply put, this tool is an average opinion in the "room of the financial sector." The opinions of financiers of all calibers can change over time, so today's 8% could easily turn into 50% closer to March 18. Over the course of a month, market sentiment could change 100 times. Upcoming speeches from FOMC committee members will significantly help clarify this issue. If at least half of them begin to consider another rate cut in the foreseeable future, the probability, according to CME FedWatch, will rise. But by that time, the dollar could also experience a significant decline.

Of course, we are not Nostradamus, but we believe that a reduction in the Fed's key rate in 2026 is inevitable. Starting in May, Kevin Warsh will lead the U.S. central bank, and he will have no independent opinion, as the Fed will now be directed by Trump. The U.S. president wants the key rate to be at least 2% lower than its current level. Additionally, the labor market still requires support, and inflation is approaching the target level. That is the task for 2026.

The average volatility of the GBP/USD pair over the last 5 trading days as of February 17 is 67 pips, which is characterized as "medium-low." On Tuesday, February 17, we expect movement within a range limited by the levels of 1.3562 and 1.3696. The upper linear regression channel is directed upward, indicating a trend recovery. The CCI indicator entered the overbought area, signaling the start of a correction on January 26, which may already be complete.

Nearest Support Levels:

S1 – 1.3550

S2 – 1.3428

S3 – 1.3306

Nearest Resistance Levels:

R1 – 1.3672

R2 – 1.3794

R3 – 1.3916

Trading Recommendations:

The GBP/USD currency pair is on track to continue its 2025 upward trend, and its long-term prospects remain unchanged. Trump's policies will continue to exert pressure on the U.S. economy, so we do not expect the U.S. currency to grow in 2026. Even its status as the "reserve currency" no longer matters to traders. Thus, long positions with a target of 1.3916 and above remain relevant for the near future when the price is above the moving average. If the price is below the moving average line, small shorts can be considered with a target of 1.3550 on technical (correction) grounds. From time to time, the American currency shows corrections (on a global scale), but for a sustained rise, it requires global positive factors.

Explanations for Illustrations:

Linear regression channels help determine the current trend. If both are pointing in the same direction, it indicates a strong current trend;

The moving average line (settings 20,0, smoothed) determines the short-term trend and the direction in which trading should currently be conducted;

Murray levels are target levels for movements and corrections;

Volatility levels (red lines) indicate the probable price channel in which the pair will spend the next day based on current volatility indicators;

The CCI indicator – its entry into the oversold area (below -250) or the overbought area (above +250) indicates that a trend reversal in the opposite direction is approaching.

*تعینات کیا مراد ہے مارکیٹ کے تجزیات یہاں ارسال کیے جاتے ہیں جس کا مقصد آپ کی بیداری بڑھانا ہے، لیکن تجارت کرنے کے لئے ہدایات دینا نہیں.

Paolo Greco,
Analytical expert of InstaSpot
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