Last week the US CPI report missed across the board and led to a strong rally in GBPUSD as the market priced out the more hawkish path for the Fed and now expects the July hike to be the last one. The resilient labour market and the rising consumer sentiment has also increased the chances of getting a soft landing which contributed to the positive risk sentiment.
Conversely, the UK employment report recently missed expectations on the jobs side but showed another upside surprise on the wages side. This should keep the BoE on track to hike interest rates with the CPI report this week being the decision maker between a 25 bps increase or another 50 bps hike.
GBPUSD Technical Analysis – Daily Timeframe
On the daily chart, we can see that since bouncing on the red 21 moving average, GBPUSD has been rallying with almost no pullbacks. After reaching the 1.3142 high, the pair finally started to pull back a bit as the price got too much overstretched as depicted by the distance from the blue 8 moving average. We can generally see some consolidation or a pullback into the moving average before another major move.
GBPUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the price pulled back into the red 21 moving average where we found already the buyers stepping in with a defined risk below the moving average and possibly the 1.35 handle as target. The sellers will need the price to fall below the 21 moving average to get some conviction and target a deeper pullback into the 1.2847 support.
GBPUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the price has broke out of a falling channel today and the moving averages have crossed to the upside. This is a signal that the bullish momentum is picking up and we may see already a new high today. For confirmation, the buyers may wait for the price to take out the previous swing high at 1.3108 before piling in more aggressively. The sellers, on the other hand, will need to see the price to fail this breakout and fall below the black trendline to pile in and extend the pullback into the 1.2847 level.
Upcoming Events
Today the main event is the US Retail Sales report. The current positive risk sentiment should give the buyers an opportunity to buy the dip in case the data beats expectations and increase the buying pressure in case the data misses. We should see a bigger selloff only if the data comes much lower than expected, leading to some general risk off sentiment. In the following days we will see the UK CPI report tomorrow and the US Jobless Claims on Thursday.
