Fundamental Overview
The USD has been generally under pressure since the benign US CPI report last week as the hawkish expectations subsided and the market switched its focus from inflation back to growth. This triggered a positive risk sentiment which is generally negative for the greenback and benefited the other major currencies.
The GBP, on the other hand, got a boost today from the hot UK CPI report where the data beat expectations across the board. The services inflation figures, which is what the BoE cares most about, came in much higher than expected showing once again that inflation remains very sticky on the services side. The markets pared back expectations for a rate cut in June with even August now being in question.
GBPUSD Technical Analysis – Daily Timeframe
On the daily chart, we can see that GBPUSD recently broke above the key swing level at the 1.27 handle as the pair continued to gain ground on a softer US Dollar. From a risk management perspective, the buyers will have a much better risk to reward setup around the trendline, but we will likely need some hot US data to trigger such a big correction.
The sellers, on the other hand, will need the price to fall below the trendline to turn the trend around and start looking for new lows.
GBPUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we have a good support around the 1.2634 level where we can find the 38.2% Fibonacci retracement level for confluence. If we get a pullback into that level, we can expect the buyers to lean on it with a defined risk below it to position for a rally into new highs.
The sellers, on the other hand, will want to see the price breaking lower to increase the bearish bets into the trendline.
GBPUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the price spiked right into the upper limit of the average daily range and started to pull back. The buyers can look to buy the dip around the 1.27 handle where we can also find the minor white trendline.
The sellers, on the other hand, will want to see the price breaking lower to invalidate the bullish setup and pile in for a drop into the 1.2634 support.
Upcoming Catalysts
Today we have the FOMC Minutes late in the day although it’s unlikely to be market moving. Tomorrow, we will get the latest UK and US PMIs, and the US Jobless Claims figures. Finally, on Friday, we conclude the week with the UK Retail Sales data.