USD
- The Fed left interest rates unchanged as expected with basically no change to the statement.
- Fed Chair Powell stressed once again that they are proceeding carefully as the full effects of policy tightening have yet to be felt.
- The recent US CPI missed expectations across the board bringing the expectations for rate cuts forward.
- The labour market is starting to show weakness as Continuing Claims are now rising at a fast pace and the recent NFP report missed across the board.
- The US Consumer Confidence and University of Michigan Consumer Sentiment continue to fall.
- The recent US ISM Manufacturing PMI missed expectations by a big margin, followed by a disappointing ISM Services PMI, although the latter remained in expansion.
- The US Retail Sales beat expectations, while the US PPI missed forecasts by a big margin.
- The recent Fedspeak has been leaning on the hawkish side, but this week’s inflation report pretty much confirmed that the Fed might be done for the cycle.
- The market doesn’t expect the Fed to hike anymore.
GBP
- The BoE kept interest rates unchanged as expected at the last meeting.
- The central bank is leaning towards keeping interest rates “higher for longer”, although it keeps a door open for further tightening if inflationary pressures were to be more persistent.
- BoE Governor Bailey repeated that they will keep rates high for long enough to get inflation back to target.
- The latest employment report beat expectations across the board with positive revisions to previous readings.
- The recent UK CPI missed forecasts across the board which should reinforce the current BoE’s stance.
- The UK PMIs showed further contraction in the services sector, which accounts for 80% of UK’s economic activity.
- The UK Retail Sales today missed expectations by a big margin across the board as consumer spending remains subdued.
- The market doesn’t expect the BoE to hike anymore.
GBPUSD Technical Analysis – Daily Timeframe
On the daily chart, we can see that GBPUSD surged to new highs following the miss in the US CPI report. The price soon after started to pull back as the pair got overstretched as depicted by the distance from the blue 8 moving average. In such instances, we can generally see a pullback into the moving average or some consolidation before the next move. In the short term, the bias remains bullish as the price has been printing higher highs and higher lows with the moving average being crossed to the upside.
GBPUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see more closely the current pullback. We can also notice that the latest leg higher diverged with the MACD, which is generally a sign of weakening momentum often followed by pullbacks or reversals. In this case, we might see a pullback all the way down to the trendline where we can find the 1.23 support and the 61.8% Fibonacci retracement level for confluence. This is where the buyers are likely to step in with a defined risk below the trendline to position for another rally into the 1.26 handle. The sellers, on the other hand, will want to see the price breaking below the trendline to increase the bearish bets and target new lows.
GBPUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that at the moment the price might be stuck in a range between the 1.2450 resistance and the 1.2375 support. If the price breaks below the support, we can expect more sellers piling in and target the trendline. Conversely, a break above the resistance should see more buyers coming into the market to extend the rally into the 1.26 handle.
