US:
- The Fed hiked by 25 bps as expected and kept everything unchanged at the last meeting.
- Fed Chair Powell reaffirmed their data dependency and kept all the options on the table.
- Inflation measures since then showed further disinflation.
- The labour market displayed signs of softening although it remains fairly tight.
- Overall, the economic data started to surprise to the downside lately.
- The Fed members are leaning more towards a pause rather than another rate hike.
- The market doesn’t expect the Fed to hike anymore.
UK:
- The BoE hiked by 25 bps as expected at the last meeting.
- The central bank seems to be leaning more on the less hawkish side as a key line in the statement was tweaked to indicate the propensity for a “higher for longer” stance rather than keeping with additional rate hikes.
- Recent key economic data like the latest employment report showed even more wage growth despite the unemployment rate ticking higher again, and the UK CPI beat expectations pointing to stagflation.
- The UK PMIs missed expectations across the board with the Services sector plunging into contraction.
- The market expects the BoE to hike by 25 bps at the upcoming meeting.
GBPUSD Technical Analysis – Daily Timeframe
On the daily chart, we can see that GBPUSD seems to be bottoming out around the key support at 1.2593 level. The bias is still bearish though as the price has been printing lower lows and lower highs and the moving averages are crossed to the downside. Nevertheless, the buyers should be leaning on this support with a defined risk below it to target the 1.3141 high. The sellers, on other hand, are likely to lean again on the red 21 moving average to position for a break below the support zone.
GBPUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the price recently got rejected from the downward trendline and a previous swing level, but the buyers keep on defending the support zone. A break above the trendline should open the door for more upside with the buyers targeting the 1.28 resistance first and eventually a breakout.
GBPUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that GBPUSD broke below the support again and set a new low. The sellers are firmly in control, but the price is now overextended as depicted by the distance from the blue 8 moving average. In such instances, we can generally see a pullback into the moving average or some consolidation before the next move. If the price pulls back into the previous swing low around the 1.2580 level, we can expect the sellers to pile in with a defined risk above the level to target a new lower low. The buyers, on the other hand, will need the price to break above the last swing high around the 1.2640 to start positioning for more upside.
Upcoming Events
This week is a bit empty on the data front with just the US ISM Services PMI tomorrow and the US Jobless Claims on Thursday being the main highlights. The market pricing is unlikely to change unless the data comes in really hot in which case, we should see the US Dollar strengthening. On the other hand, weaker readings might just bring forward rate cuts expectations and weigh on the greenback in the short term.