Fundamental Overview
The bullish momentum in the USD is starting to fade as Treasury yields continue to fall. We had two possible catalysts yesterday.
The first one was the much weaker than expected US NFIB Index which dropped to a 3 month low. There wasn’t an immediate reaction in the markets on the release, but things started to move as the American session began.
The second one was a comment from BoC’s Macklem where he said that bigger cuts are possible if the economy and CPI were weaker. There’s generally a groupthink with central banks, so the market might have projected that to the Fed’s decision next week.
The probabilities for the Fed to cut by 50 bps at the upcoming meeting increased to 35% and a soft US CPI report today might get us back to a 50/50 chance between 25 and 50 bps cut. For the BoE, the market sees a 76% probability of no change at the upcoming meeting and a total of 50 bps of easing by year-end.
GBPUSD Technical Analysis – Daily Timeframe
On the daily chart, we can see that GBPUSD is bouncing from the key 1.3050 support where we have also the 38.2% Fibonacci retracement level for confluence. This is where we can expect the buyers to pile in with a defined risk below the support to position for new highs. The sellers, on the other hand, will want to see the price breaking lower to increase the bearish bets into the trendline.
GBPUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see more clearly the bounce from the key support. The buyers will want to see the price rallying and breaking above the 1.3140 level next to increase the bullish bets into new highs.
GBPUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have a minor resistance around the 1.3110 level. We should see the bullish momentum increasing on a break above the level with the 1.3140 level as the next target. The red lines define the average daily range for today.
Upcoming Catalysts
Today we get the US CPI report. Tomorrow, we have the US Jobless Claims figures and the US PPI data. On Friday, we conclude the week with the University of Michigan Consumer Sentiment report.