Fundamental Overview
On Wednesday, the Fed finally started its easing cycle and decided to do it with a 50 bps cut. The market was already leaning towards a 50 bps move, so it wasn’t a surprise.
The larger cut was framed as kind of an “insurance” cut with the dot plot showing two more 25 bps cuts by the end of the year and less than the market expected in 2025.
The US Dollar didn’t get a boost despite the rise in Treasury yields. Now that the decision is behind us, the focus will be on the economic data.
If we start to see an improvement, then Treasury yields will likely continue to rise and lead to a reprising in the dovish expectations supporting the greenback in the short-term.
Conversely, if the data weakens, the market will likely go ahead with expecting more 50 bps cuts by year-end and weighing on the US Dollar.
On the GBP side, the BoE kept interest rates unchanged yesterday and sounded more hawkish than expected with the markets now pricing just 39 bps of easing by year end.
GBPUSD Technical Analysis – Daily Timeframe
On the daily chart, we can see that GBPUSD managed to rally to a new high following the Fed’s and BoE’s decisions. From a risk management perspective, the buyers would have a much better risk to reward setup around the 1.30 handle. The sellers, on the other hand, will likely wait for the price to fall below the previous high level at 1.3265 to start piling in for a correction lower.
GBPUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we have trendline defining the current bullish momentum. If we get a pullback, the buyers will likely lean on the trendline with a defined risk below it to position for the continuation of the uptrend. The sellers, on the other hand, will want to see the price breaking lower to increase the bearish bets into the 1.30 handle.
GBPUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, there’s not much else we can add but a move below the 1.3265 level will likely increase the bearish momentum into the trendline as the sellers are likely to pile in. The red lines define the average daily range for today.