Fundamental Overview
The US Dollar yesterday weakened across the board despite a higher than expected US Core PPI and Fed Chair Powell acknowledging the need to proceed more carefully with rate cuts from here on.
This might be a signal that the market could be fine with just two rate cuts priced in for 2025 and will need some stronger reasons to price out those as well. This could trigger a bigger pullback in the US Dollar after the incredible run since the beginning of October.
On the GBP side, this week we got the UK labour market report and although the data was mostly mixed, it leant more on the dovish side. The UK GDP this morning missed expectations slightly but overall the week didn’t change much for the BoE.
The market sees just a 17% chance of a 25 bps cut in December and a total of 61 bps of easing by the end of 2025.
GBPUSD Technical Analysis – Daily Timeframe
On the daily chart, we can see that GBPUSD is testing a key swing low level at 1.2660. This is where the buyers are stepping in with a defined risk below the level to position for a pullback into the major downward trendline.
The sellers, on the other hand, will want to see the price breaking lower to increase the bearish bets into new lows although a break below the major upward trendline will give them much more conviction.
GBPUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see more clearly the consolidation around the key level. There’s not much else we can glean from this timeframe so we need to zoom in to see more details.
GBPUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the price is breaking out of the minor downward trendline that was defining the bearish momentum on this timeframe. The buyers will likely start to pile in here to position for the pullback into the major trendline and will likely increase the bullish bets on the break of the minor resistance zone around the 1.2715 level.
The sellers, on the other hand, will likely step in around the resistance to position for the break below the major upward trendline. The red lines define the average daily range for today.
Upcoming Catalysts
Today, we conclude the week with the US Retail Sales data.
