Fundamental Overview
The USD weakened across the board yesterday following another soft US CPI report and benign Jobless Claims figures. The market not only fully priced in a rate cut in September but also started to price in some chances of a back-to-back rate cut in November.
Overall, we had a goldilocks data release with an economy that is slowing but still growing. This should support the soft-landing narrative and be positive for the risk sentiment.
The GBP, on the other hand, keeps on gaining against the US Dollar mainly because of the risk-on sentiment as the US data continues to support at least two rate cuts from the Fed without sending recessionary signals.
On the monetary policy front, the BoE in June left the door open for a rate cut in August but BoE’s Pill poured some cold water on those expectations. The next UK CPI report on July 17th will likely decide whether the central bank will be able to deliver the first cut in August or wait some more time.
GBPUSD Technical Analysis – Daily Timeframe
On the daily chart, we can see that GBPUSD managed to get past the 1.28 handle this week on some hawkish comments from BoE’s Pill and eventually extended the rally above the 1.29 handle following the soft US CPI report. All else being equal, the target should now be the cycle high at 1.3140.
GBPUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we now have a trendline defining the current bullish momentum. From a risk management perspective, the buyers will have a better risk to reward setup around the trendline to position for a continuation of the rally into the 1.3140 level next. The sellers, on the other hand, will want to see the price breaking below the trendline to turn the bias more bearish and pile in for a drop back into the 1.28 handle.
GBPUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that after some consolidation around the 1.29 handle, the price restarted going up today as the positive risk sentiment weighs on the greenback. There’s not much to do here from a trading perspective as chasing the move at these levels doesn’t look good. The red lines define the average daily range for today.
Upcoming Catalysts
Today we conclude the week with the US PPI and the University of Michigan Consumer Sentiment survey.
