Fundamental Overview
The USD regained some strength in latter part of last week. From the monetary policy perspective, nothing has changed as the market continues to expect at least two rate cuts by the end of the year and sees some chances of a back-to-back cut in November.
The data continues to suggest that the US economy remains resilient with inflation slowly falling back to target. Overall, this should continue to support the soft-landing narrative and be positive for risk sentiment. The new driver could be Trump now looking more and more like a potential winner and his policies are seen as inflationary which could see the Fed eventually going even more slowly on rate cuts.
The GBP, on the other hand, has been supported against the US Dollar in the past weeks mainly because of the risk-on sentiment, although that has changed last week. On the monetary policy front, the data last 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 a rate cut in August anymore.
GBPUSD Technical Analysis – Daily Timeframe
On the daily chart, we can see that GBPUSD erased all the gains from the prior week and it’s now near the support zone around the 1.29 handle where we can also find the 38.2% Fibonacci retracement level for confluence.
This is where we can expect the buyers to step in with a defined risk below the support to position for a rally into the 1.3140 level next. The sellers, on the other hand, will want to see the price breaking below the support to increase the bearish bets into the major trendline.
GBPUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the price is now consolidating just above the support zone as the buyers are starting to pile in, while the sellers keep pushing towards a breakout to the downside. There’s not much we can glean from this timeframe, so we need to zoom in to see some more details.
GBPUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the price is currently ranging between the 1.29 and 1.2940 levels. The buyers will want to see the price breaking above the 1.2940 level to gain more conviction and increase the bullish bets into new highs.
The sellers, on the other hand, will look for a breakout to the downside to increase the bearish bets into new lows. The red lines define the average daily range for today.
Upcoming Catalysts
This week is pretty empty on the data front. We begin tomorrow with the release of the UK and the US Flash PMIs. On Thursday, we will get the latest US Jobless Claims figures. Finally, on Friday we conclude the week with the US PCE report.
