The Fed hiked interest rates by 25 bps as expected and left everything. Fed Chair Powell didn’t offer any hint on the next move and just reaffirmed their data dependency, keeping all the options on the table. The economic data since the FOMC meeting has been supporting the soft-landing narrative as the labour market data remained strong while inflation data missed expectations.
Conversely, the UK CPI missed expectations across the board and triggered a big repricing in interest rates expectations. In fact, the market was pricing a higher chance of a 50 bps hike prior to the report given the higher wages data in the previous UK employment report. Now, the market sees a higher chance that the BoE hikes by 25 bps this week.
GBPUSD Technical Analysis – Daily Timeframe
On the daily chart, we can see that GBPUSD has broken below the 1.2847 support, where we had also the confluence with the red 21 moving average and extended the selloff into the upward trendline and the 50% Fibonacci retracement level. This is where we should start to see the buyers piling in with a defined risk below the Fibonacci level to target a new high. The sellers, on the other hand, will need the price to break below the Fibonacci level to extend the fall into the 1.2593 support.
GBPUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the price is starting to diverge with the MACD right when it’s nearing the trendline. This is generally a sign of weakening momentum often followed by pullbacks or reversals. In this case, we can notice that the formation looks like a falling wedge pattern, which increases the chances of getting at least a pullback into the 1.30 handle.
GBPUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that more closely the falling wedge and how the price has been respecting the top trendline of the pattern. If the price breaks above the top trendline, the buyers are likely to pile in and target the 1.30 handle, which is also the top of the pattern. On the other hand, if the price breaks below the strong support zone at 1.2725, we can expect the sellers increase the bearish momentum and lead to a selloff into the 1.2593 level.
Upcoming Events
Today the only notable event will be the US ADP report. This is generally a less reliable labour market indicator, but it can move the market. Tomorrow, the market will be focused on the US Jobless Claims and the ISM Services PMI data. Finally, on Friday, we conclude the week with the US NFP report. Strong data should support the USD, while weak readings should weigh on the greenback.
