Fundamental Overview
The USD remains on the backfoot as the US data continues to point to resilient growth with falling inflation. This week, we got a good US Retail Sales report suggesting that the stories of deteriorating consumer spending have been exaggerated. Overall, this should continue to support the soft-landing narrative and be positive for the risk sentiment.
The GBP, on the other hand, keeps on gaining against the US Dollar mainly because of the risk-on sentiment as the US data continues to support at least two rate cuts from the Fed without sending recessionary signals. Yesterday’s greenback weakness might have been due to the drop in the USDJPY pair as flows there could have spilled over other markets.
On the monetary policy front, the data this week was a disappointment for the BoE as the UK CPI figures were unchanged from the prior month and the labour market report showed wage growth remaining at elevated levels. Therefore, the market doesn’t expect anymore a rate cut in August.
GBPUSD Technical Analysis – Daily Timeframe
On the daily chart, we can see that GBPUSD managed to extend the rally above the 1.30 handle following the UK CPI report and general US Dollar weakness yesterday. From a risk management perspective, the buyers will have a better risk to reward setup around the 1.29 handle where we can also find the 38.2% Fibonacci retracement level for confluence. The sellers, on the other hand, will want to see the price breaking below the 1.29 handle to increase the bearish bets into the major trendline around the 1.27 handle.
GBPUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we have a minor trendline defining the current bullish momentum. We can expect the buyers to keep leaning on it to position for a continuation of the uptrend into the 1.3140 level.
The sellers, on the other hand, will want to see the price breaking below the trendline to position for a drop into the 1.29 support eventually targeting a break below it.
GBPUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the price is currently pulling back into the minor trendline. If the price fails to drop all the way back to the trendline, more aggressive buyers might pile in on a break above the recent swing high at 1.3012. The red lines define the average daily range for today.
Upcoming Catalysts
Today we get the latest US Jobless Claims figures, while tomorrow we conclude the week with the UK Retail Sales data.
