GBPUSD Technical Analysis - Looking for a breakout

The most recent NFP report, released last Friday, once again outperformed expectations, extending its impressive winning streak to 14. However, upon closer analysis, the report revealed some less favourable details. The unemployment rate experienced a significant increase from 3.4% to 3.7%, marking the largest month-over-month jump since the pandemic began. Additionally, there was a slight decline in the average workweek hours, which could indicate potential layoffs being considered by employers. Overall, the report provided a mix of information that could be interpreted differently by individuals.

Shifting focus to the US ISM Services PMI, it came in considerably lower than anticipated at 50.3, narrowly missing the threshold for contractionary territory. The employment sub-index indicated a contraction, while the prices paid sub-index saw a substantial decrease, returning to levels last observed in May 2020. As a result, the market responded by further reducing the likelihood of additional interest rate hikes by the Federal Reserve Federal Reserve The Federal Reserve System, more commonly known as the Fed, represents the central banking system of the United States. Like other central banks globally, the Fed is responsible for monetary policy, in this case in the US.The Fed is one of the most watched and followed entities for forex traders, given its material impact on the US dollar. Founded initially in 1913, the Fed was created to perform a wide range of functions. This includes stabilizing and maintaining flexible monetary policy in the The Federal Reserve System, more commonly known as the Fed, represents the central banking system of the United States. Like other central banks globally, the Fed is responsible for monetary policy, in this case in the US.The Fed is one of the most watched and followed entities for forex traders, given its material impact on the US dollar. Founded initially in 1913, the Fed was created to perform a wide range of functions. This includes stabilizing and maintaining flexible monetary policy in the Read this Term (Fed).

Furthermore, the recent surprising rate hikes by the RBA and the BoC may have influenced risk sentiment, leading to concerns that the Fed might follow suit. However, it is unlikely given that the Fed typically aligns its actions with market pricing, and we should also take into account that the CPI report has not yet been released.

GBPUSD Technical Analysis – Daily Timeframe

On the daily chart, the GBPUSD is trading again within the range between the 1.2340 support and 1.2530 resistance. Just a week ago it looked like the pair was topping out as we also had the Head and Shoulders pattern as an extra bearish signal, but now that the moving averages are on the verge of another crossover to the upside, the bias is murkier. Maybe this was just a bigger and more complex pullback.

GBPUSD Technical Analysis – 4 hour Timeframe

On the 4 hour chart, the levels to watch are of course the resistance and support of the range. Given the uncertainty in the markets, it may be better to wait for a breakout supported by a fundamental catalyst. The buyers, should pile in if the price breaks above the 1.2550 level, while the sellers should jump onboard in case the price breaks below the 1.2300 handle.

GBPUSD Technical Analysis – 1 hour Timeframe

On the 1 hour chart, we can see the short term price action within the range and we can notice that there isn’t much to glean from this chart as support and resistance levels are confusing as they generally are in rangebound markets. There’s just a possible trendline where the price may bounce off of or break through and give the buyers and sellers an extra opportunity to enter in line with their biases before the actual range breakouts.

The US Jobless Claims report is worth monitoring today in terms of potential risks, although its impact on the market is not anticipated to be substantial unless there are significant deviations from the expected number:

• If the report exceeds expectations by a significant margin, it could spark some hawkish expectations in the market. This could suggest that inflation may remain elevated due to a tight labour market, potentially influencing the market's outlook.
• Conversely, if the report falls short of expectations by a significant margin, it should reaffirm the Federal Reserve's neutral stance. Unless accompanied by a high Consumer Price Index (CPI), the market might even factor in the end of the interest rate hiking cycle.