Fundamental Overview
Yesterday, the US PPI report missed expectations by a big margin triggering a selloff in the US Dollar as the market started to position into a potentially soft US CPI release today.
The UK CPI this morning missed estimates across the board as well and raised the probabilities of a back-to-back cut in September. Most of the initial GBP weakness though has been erased as the selloff in the greenback has been stronger and in the bigger picture a positive risk sentiment should favour the pound anyway.
For the Fed, the market is split between a 25 and 50 bps cut in September and a total of 107 bps of easing by year-end. On the BoE side, the market sees a 41% probability of a 25 bps cut in September and a total of 47 bps of easing by year-end.
GBPUSD Technical Analysis – Daily Timeframe
On the daily chart, we can see that GBPUSD is approaching a key resistance zone around the 1.29 handle. That’s where we can expect the sellers to step in with a defined risk above the level to position for a drop into the 1.26 handle. The buyers, on the other hand, will want to see the price breaking higher to increase the bullish bets into new highs.
GBPUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that once the price broke above the downward trendline, the bullish momentum started to increase as more buyers piled in. We now have a minor upward trendline defining the current bullish momentum. The buyers will likely keep on leaning on the trendline to position for new highs, while the sellers will want to see the price breaking lower to position for a drop into the 1.26 handle.
GBPUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the price bounced around the trendline and the 50% Fibonacci retracement level this morning following the drop from the UK CPI release. The red lines define the average daily range for today.
Upcoming Catalysts
Today we have the US CPI report. Tomorrow, we get the US Retail Sales and Jobless Claims figures. Finally, on Friday, we conclude the week with the University of Michigan Consumer Sentiment survey.
