Fundamental Overview
The USD has been on a hell of a run recently despite the lack of catalysts and no major repricing in interest rates expectations.
The main culprit for the recent strength in the US Dollar has been the rally in long term Treasury yields. The yield curve has been bear-flattening which is what you would expect with higher growth and potentially higher inflation expectations.
There’s been a good argument that the markets have been already positioning for a Trump victory which is expected to strengthen the higher growth and less rate cuts expectations.
For now, this is the trend and it’s generally a bad idea to fight such trends without a catalyst. Unfortunately, we don’t have much left for October as the main events will be in the first weeks of November when we will get the top tier economic reports, the US elections and the FOMC decision.
On the GBP side, we got the UK Flash PMIs this morning and the data missed expectations slightly across the board. The market’s pricing didn’t change much though as the market continues to expect a 25 bps cut at the upcoming meeting followed by another one in December.
GBPUSD Technical Analysis – Daily Timeframe
On the daily chart, we can see that GBPUSD eventually reached the major trendline and bounced off of it as the buyers stepped in. The first target for them should be the 1.31 handle. The sellers, on the other hand, will want to see the price breaking below the trendline to increase the bearish bets into the 1.27 handle.
GBPUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we have a minor downward trendline defining the current bearish momentum. If the price gets there, we can expect the sellers to lean on it to position for a break below the major trendline. The buyers, on the other hand, will look for a break above the downward trendline to increase the bullish bets into the 1.31 handle.
GBPUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have another minor trendline defining the bearish momentum on this timeframe. The buyers will want to see the price breaking higher to increase the bullish bets into the next trendline, while the sellers will likely lean on it to position for a break below the major trendline. The red line define the average daily range for today.
Upcoming Catalysts
Today we have the US Jobless Claims and the US Flash PMIs.
