Fundamental Overview
The USD got a boost from the strong US Consumer Confidence data which triggered an aggressive rise in long term Treasury yields. The report however just showed that the labour market remains resilient which is good news for growth and not necessarily bad news for inflation. The greenback benefited also from the risk-off sentiment which seems to be caused more by the month-end flows rather than a fundamental driver.
The GBP, on the other hand, has been supported by a slightly more hawkish repricing in interest rates expectations following the hot UK CPI report last week which saw the chances of a rate cut in June evaporating. If we go back into risk-on sentiment, the greenback could start losing ground against the Pound again.
GBPUSD Technical Analysis – Daily Timeframe
On the daily chart, we can see that GBPUSD managed to eventually hit the 1.28 handle. The pair started to drop steadily since then as the risk-off sentiment in the markets boosted the US Dollar. If the correction extends further, we can expect the buyers to lean on the trendline around the 1.2630 level to position for a rally into new highs with a good risk to reward setup.
The sellers, on the other hand, will want to see the price breaking lower to invalidate the bullish setup and position for a drop into the 1.25 handle next.
GBPUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we have the confluence of the previous swing high and the 50.0% Fibonacci retracement level around the trendline. This should technically strengthen the support and give the buyers a bit more conviction for a bounce. A break below that support should give the sellers more control and increase the bearish momentum.
GBPUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have a good resistance at the 1.2710 level where we can find the confluence of the downward minor trendline and the 38.2% Fibonacci retracement level.
This is where we can expect the sellers to step in with a defined risk above the trendline to position for a drop into the major trendline with a good risk to reward setup. The buyers, on the other hand, will want to see the price breaking higher to invalidate the bearish setup and start targeting new highs.
Upcoming Catalysts
Today we will see the latest US Jobless Claims figures, while tomorrow we conclude the week with the US PCE report.
