US:
- The Fed hiked by 25 bps as expected and kept everything unchanged.
- Fed Chair Powell reaffirmed their data dependency and kept all the options on the table.
- The US economic data keeps on surprising to the upside, but inflation expectations and CPI readings continue to show disinflation with the last two Core CPI M/M figures coming in at 0.16%.
- At the moment, the market doesn’t expect another hike from the Fed, but the next NFP and CPI data will be crucial to confirm or change this view.
UK:
- The BoE hiked by 25 bps as expected.
- The central bank seems to be leaning more on the less hawkish side as a key line in the statement was tweaked to indicate the propensity for a “higher for longer” stance rather than keeping with additional rate hikes.
- Recent economic data is not supporting the BoE stance as the latest employment report showed even more wage growth despite the unemployment rate ticking higher again, and the UK CPI beat expectations pointing to stagflation.
- The BoE is expected to hike by another 25 bps in September.
GBPUSD Technical Analysis – Daily Timeframe
On the daily chart, we can see that GBPUSD has bounced on the key support zone around the 1.2593 level where we had also the 38.2% Fibonacci retracement level for confluence. This now looks like a double bottom and the price will need to break above the neckline around the 1.28 handle to confirm the pattern. The measured target in that case would be an extension towards the 1.30 handle.
GBPUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that GBPUSD is approaching the neckline area around the 1.28 handle where we can find a strong resistance as the price has previously reacted multiple times. We can also notice that the downward trendline that was defining the downtrend got broken, so if we break above the resistance, the market structure would become bullish.
GBPUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have another upward trendline that is defining the current bullish momentum as we approach the resistance. That’s where we can expect the sellers piling in with a defined risk above the resistance to target the 1.26 support with a break below the trendline seeing even more sellers jumping onboard. The buyers, on the other hand, will want to see the price breaking above the resistance to pile in even more aggressively and extend the rally towards the 1.30 handle.
Upcoming Events
This week is pretty empty on the economic data side as we will only have the PMIs tomorrow and the US Jobless Claims on Thursday. Given the strong appreciation in the US Dollar seen in the past weeks, we can expect some USD weakness if the data misses expectations, and we will likely need much stronger than expected readings to see another sustained rally in the greenback. Remember also that this is the Jackson Hole Symposium week, so we will hear from many central bankers including Fed Chair Powell, who is set to speak on Friday.