USD
- The Fed left interest rates unchanged as expected at the last meeting 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 US Core PCE yesterday came in line with forecasts with the disinflationary progress continuing steady.
- 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 latest US PMIs came basically in line with expectations with a miss in the Manufacturing index and a beat in the Services measure.
- The US Consumer Confidence this week beat expectations although the details about the labour market continued to weaken.
- The hawkish Fed members recently shifted their stance to a more neutral position.
- 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.
- The BoE members continue to repeat that they will keep rates high for long enough to get inflation back to target.
- The latest employment report beat expectations with wage growth remaining at elevated levels.
- The UK CPI missed expectations across the board, which was a welcome development for the BoE.
- The UK PMIs last week beat expectations on both the Manufacturing and Services measures, with the Services sector crawling back in expansion.
- The latest UK Retail Sales missed expectations across the board by a big margin as consumer spending remains weak.
- The market doesn’t expect the BoE to hike anymore.
GBPUSD Technical Analysis – Daily Timeframe
On the daily chart, we can see that GBPUSD recently broke through the key resistance around the 1.26 handle where we had also the 50% Fibonacci retracement level for confluence. The pair managed to extend the rally to the 1.12750 level where it got rejected from the 61.8% Fibonacci retracement level of the entire fall from the cycle high. The sellers will now want to see the price falling back below the 1.26 handle to pile in and target new lows.
GBPUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the pair has been diverging with the MACD for quite some time as it approached the key resistance level. This is generally a sign of weakening momentum often followed by pullbacks or reversals. In this case, the buyers are likely to lean on the trendline and the previous resistance that now might act as support. The sellers, on the other hand, will want to see the price breaking lower to position for a drop into new lows.
GBPUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see more closely the bullish setup around the trendline and the support level. What happens here will likely decide where the pair will go in the next few weeks. A bounce and a break above the 1.2670 level should confirm another rally, while a break below the trendline and the support is likely to trigger a selloff into the 1.24 handle.
Upcoming Events
Today, the main event will be the release of the US ISM Manufacturing PMI which missed expectations by a big margin the last time. A strong report is likely to give another boost to the US Dollar while weak figures could weigh on the greenback in the short term.
