Last week, the US CPI came basically in line with expectations, but the good news is that the Core M/M reading once again printed at 0.2%. The less good news is that the US Initial Claims spiked higher, but Continuing Claims remained solid. We have already seen Claims spiking higher in the past months, so it shouldn’t be worrying yet. The long-term inflation expectations in the University of Michigan report ticked lower, so on the data side the soft-landing narrative was supported. The US Dollar, nonetheless, appreciated across the board as the attention may have turned already on the next data given the higher energy prices and China starting to stimulate more.
On the other hand, the BoE hiked by 25 bps as expected as the UK CPI missed expectations across the board and UK employment report showed a mixed picture with both the unemployment rate and wage growth higher. 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 “higher for longer” stance rather than keeping with additional rate hikes. Nevertheless, the market expects the BoE to hike by 25 bps again in September and the data will show if that’s going to be the case.
GBPUSD Technical Analysis – Daily Timeframe
On the daily chart, we can see that GBPUSD has bounced twice near the 1.2593 support where we have also the 38.2% Fibonacci retracement level. This may end up being a double bottom, but the price will need to break above the neckline at 1.2820 to confirm it. For now, the bias remains bearish as the pair broke below the trendline and the price keeps printing lower lows and lower highs and the moving averages are crossed to the downside.
GBPUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we got a third rejection from the downward trendline as the sellers stepped in with a defined risk above to target a break below the support. The buyers, on the other hand, are leaning on the support zone to target new highs. This consolidation is bound to resolve on either side, so this is something to watch as a breakout should lead to a sustained move.
GBPUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have a swing high resistance at 1.2740 where we can also find the 61.8% Fibonacci retracement level. That will be a key short-term resistance for the sellers as a break above it and the trendline should give the buyers more control and possibly lead to a break above the 1.2820 neckline.
Upcoming Events
This week is a big one for the GBP as we have the Labour Market report today and the Inflation report tomorrow. Better than expected data should make the market to expect more hikes from the BoE, while worse than expected figures should support their “higher for longer” stance. Today we will also see the latest US Retail Sales report and a beat should support the USD even more, while a miss may pressure it in the short term. Finally, we have the US Jobless Claims on Thursday and after the miss in the prior week it will be interesting to see if the data misses again.
