US:

  • The Fed hiked by 25 bps as expected and kept everything unchanged at the last meeting.
  • Fed Chair Powell reaffirmed their data dependency and kept all the options on the table.
  • The US CPI yesterday came in line with expectations, so the market’s pricing remained roughly the same.
  • The labour market displayed signs of softening although it remains fairly solid.
  • Last week the ISM Services PMI and Jobless Claims surprised to the upside, which point to a resilient economy overall.
  • Yesterday, we got yet another beat in Jobless Claims followed by strong Retail Sales and PPI data.
  • The Fed members are leaning more towards a pause in September and the next decision will still be dictated by the economic data.
  • The market doesn’t expect the Fed to hike at the September meeting and there’s just a 33% chance of a hike in November, although that can change if the data keeps on running hot.

UK:

  • The BoE hiked by 25 bps as expected at the last meeting.
  • The central bank seems to be leaning more on the less hawkish side as a key line in the statement was tweaked to indicate the propensity for a “high for longer” stance rather than keeping with additional rate hikes.
  • Key economic data like the latest employment report showed a very high wage growth despite the rising unemployment rate, and the UK CPI beat expectations the last time pointing to a stagflation.
  • The UK PMIs recently missed expectations across the board with the Services sector plunging into contraction.
  • The market expects the BoE to hike by 25 bps at the upcoming meeting.

GBPUSD Technical Analysis – Daily Timeframe

GBPUSD Technical Analysis
GBPUSD Daily

On the daily chart, we can see that GBPUSD is in a clear downtrend with the price printing lower lows and lower highs and the moving averages being crossed to the downside. After the break of the key 1.2593 support, the price started to fall in a sustained way as the US data kept on surprising to the upside and the UK data deteriorated.

From a risk management perspective, the sellers would be better off if the price pulled back into the downward trendline where we have also the confluence with the red 21 moving average to position for another selloff with a tight risk, but it’s hard to see a reason for such a big pullback given the state of things.

GBPUSD Technical Analysis – 4 hour Timeframe

GBPUSD Technical Analysis
GBPUSD 4 hour

On the 4 hour chart, we can see that we have a divergence with the MACD which is generally a sign of weakening momentum often followed by pullbacks or reversals. In this case, the price can either pull back into the support turned resistance around the 1.2440 level or the swing high at 1.2540 where we can also find the 38.2% Fibonacci retracement level for confluence.

GBPUSD Technical Analysis – 1 hour Timeframe

GBPUSD Technical Analysis
GBPUSD 1 hour

On the 1 hour chart, we can see the resistance around the 1.2440 level where we have also the 38.2% Fibonacci retracement level. This is where the sellers should pile in with a defined risk above the resistance to position for a fall into the 1.2310 level. Alternatively, if the price breaks through the resistance, the sellers will be waiting around the 1.2540 level where they will have an even better risk to reward setup. The buyers, on the other hand, will want to see the price breaking resistances to pile in and ride the pullbacks.

Upcoming Events

Today the only notable report left to be released for this week is the University of Michigan Consumer sentiment survey. Consumer sentiment might have deteriorated given higher energy prices and that might have filtered to higher inflation expectations.