GBP/USD Weekly Outlook: Oversold Pound Shows Signs of Possible Uptick

The British pound appears oversold against the US dollar on the weekly chart after a 2.4% decline in January 2025. On Tuesday, the GBP/USD pair hit a low of $1.2099 before buyers stepped in, highlighting a key technical level for the near term.

Key Support Levels

The green channel base support zone between $1.2037 and $1.2069 played a crucial role in halting the pound’s decline. The price touched the upper range of this support area, triggering a strong influx of buyers. This is confirmed by the formation of a bullish hammer candlestick, as the pair closed the day near its peak.

The daily chart further reinforces the significance of this support level, which could act as a pivotal zone for near-term price action. A potential recovery might lift GBP/USD to the $1.23 level, especially if upcoming US economic data proves less favourable for the dollar, prompting traders to take profits.

Resistance Levels to Watch

If GBP/USD does climb to $1.23, traders should note that this was previously a key support level and may now act as resistance. A breakout above this point could signal further bullish momentum, but rejection might see the pair consolidate or retrace.

RSI and Oversold Conditions

Both weekly and daily Relative Strength Index (RSI) indicators suggest oversold conditions, with readings of 29 and 28, respectively. These low RSI levels were another factor contributing to yesterday’s uptick, which may extend into the latter part of this week.

Downside Risks

Despite the current recovery, failure to maintain the $1.2037-$1.2069 support zone could see GBP/USD slide further towards the next key support levels at $1.1803-$1.1841.

Conclusion

Traders should monitor US economic releases closely, as less robust data could weaken the dollar and support a pound recovery. On the flip side, stronger-than-expected US figures might reinforce the dollar’s strength, challenging the pound’s upside potential.

Stay tuned for further updates and analysis on the GBP/USD pair as market conditions evolve.