Fundamental Overview
Since last Friday, the USD has been mostly weak as Fed Chair Powell delivered a more dovish than expected speech at the Jackson Hole Symposium where he basically kept the door open for a 50 bps cut at the September meeting. In fact, the line saying that they will do everything they can to support a strong labour market was key.
That pushed Treasury yields lower and weighed on the greenback across the board. In fact, the recent appreciation of the GBP has been mostly driven by the US Dollar side of the equation. The BoE started its easing cycle before the Fed and the market expects the central bank to deliver a total of 42 bps of easing by year-end with a 25 bps cut fully priced in for November.
GBPUSD Technical Analysis – Daily Timeframe
On the daily chart, we can see that GBPUSD eventually rallied all the way up to a new cycle high breaking the 2023 high at 1.3140. That’s been a very strong move and if there was to be a pullback, it shouldn’t really surprise anyone.
The buyers will likely step in around the 1.3140 level with a defined risk below it to position for more upside, while the sellers will want to see the price breaking lower to start targeting a deeper pullback into the trendline.
GBPUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that if we have another minor trendline around the 1.3050 level. If we were to get a pullback into it, the buyers will likely lean on it to position for a new cycle high. The sellers, on the other hand, will want to see the price breaking lower to increase the bearish bets into the major trendline.
GBPUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the price is breaking below another minor trendline that’s been defining the bullish momentum on this timeframe. This could be a signal of an imminent pullback into the 1.3140 level.
We can expect the sellers to pile in around these levels to position for a drop into the 1.3140 level, while the buyers will want to see the price breaking the recent high to extend the rally into a new cycle high. The red lines define the average daily range for today.
Upcoming Catalysts
Tomorrow we get the latest US Jobless Claims figures, while on Friday, we conclude the week with the US PCE report.