Fundamental Overview
The USD was sold across the board on Wednesday following the soft US CPI report. The data made the market to price back in two cuts for this year. Later in the day though we got a bit more hawkish than expected FOMC decision where the dot plot showed that the Fed sees just one cut for this year despite the soft US CPI report.
This gave the greenback a boost although Fed Chair Powell backpedalled on the projections making them a bit less worrying as the central bank remains very data dependent. Moreover, the US Dollar found further support yesterday as the market went into risk-off mode for unclear reasons.
The GBP, on the other hand, got under pressure mainly because of the risk-off sentiment and the US Dollar strength. If we go back into risk-on, we should see the greenback losing ground against the Pound again.
GBPUSD Technical Analysis – Daily Timeframe
On the daily chart, we can see that GBPUSD spiked above the 1.28 handle following the soft US CPI release but eventually gave back everything following the more hawkish than expected FOMC decision and the risk-off sentiment.
The price is now trading around a key support zone at the 1.27 handle. A breakdown should open the door for new lows with the first target coming around the 1.26 handle.
GBPUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we have the 38.2% Fibonacci retracement level of the entire rally since April standing around the 1.2634 level which is going to be the first target for the sellers in case the price breaks decisively below the 1.27 support zone.
The buyers, on the other hand, will likely step in here at the 1.27 support zone with a defined risk below it to position for a rally into new highs.
GBPUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the price is near the lower level of the average daily range. This is where we might see a bounce as the price generally doesn’t extend beyond the level without a strong catalyst.
In case we get a pullback, the sellers will likely lean on the minor downward trendline and the 38.2% Fibonacci retracement level at 1.2740. The buyers, on the other hand, will want to see the price breaking higher to gain even more confidence and increase the bullish bets into new highs.
Upcoming Catalysts
Today we conclude the week with the University of Michigan Consumer Sentiment survey where the data is expected to show an increase to 72.0 vs. 69.1 prior.