Fundamental Overview
The strong bullish momentum in the US Dollar waned a bit in this final part of the week as we got a pullback in Treasury yields. In fact, the main culprit for the US Dollar strength lately has been the rally in long term Treasury yields.
The yield curve has been bear-flattening which is what you would expect with higher growth and potentially higher inflation expectations. There’s a good argument that this rally was a reflection of higher Trump’s winning odds.
On the GBP side, we got the UK budget announcement yesterday which led to some choppy price action in the British Pound. It looks like the market took it as less contractionary than expected with the markets scaling back rate cuts expectations for the BoE.
GBPUSD Technical Analysis – Daily Timeframe
On the daily chart, we can see that GBPUSD seems to be bottoming out around the major trendline with the buyers stepping in for a potential rally into the 1.32 handle. The sellers will want to see the price breaking below the trendline to extend the drop into the 1.27 handle.
GBPUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the price is breaking above the downward trendline that was defining the bearish momentum on this timeframe. This might be a signal of a bigger pullback to the upside.
The buyers will need to break above the 1.3050 level to gain more conviction and increase the bullish bets into the 1.32 handle next. The sellers, on the other hand, will likely step in around the 1.3050 level to position for the break of the major trendline.
GBPUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see the choppy price action since yesterday with no clear direction. There’s not much to do here other than waiting for the price to either break above the 1.3050 level or below the trendline. The red lines define the average daily range for today.
Upcoming Catalysts
Today we have the US PCE, the US Jobless Claims and the US Employment Cost Index data. Tomorrow, we conclude the week with the US NFP and the US ISM Manufacturing PMI.
