Fundamental Overview
The US Dollar got a bit of a boost this week as Fed Chair Powell reiterated that 50 bps of easing by year end remains the base case. The market’s probability for the Fed to cut by 50 bps in November fell from 51% to 40% as a result.
On the data side, the ISM Manufacturing PMI released yesterday missed expectations slightly. On the bright side, the new orders index improved a little which might be an early signal of better times ahead. By contrast, the employment component fell further into contraction but remained above the cycle low.
On the GBP side, the UK PMIs last week were a touch softer than expected but still solid compared to its peers. The market expects the BoE to deliver 36 bps of easing by year-end with a 25 bps cut in November priced at 85% probability.
GBPUSD Technical Analysis – Daily Timeframe
On the daily chart, we can see that GBPUSD pulled back to the key support support zone around the 1.3265 level 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 level to position for a rally into new highs. The sellers, on the other hand, will want to see the price breaking below the support and the major trendline to increase the bearish bets into new lows.
GBPUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the price broke below the minor upward trendline on Monday and extended the losses as the bearish momentum picked up with the sellers piling in for a drop into the support zone. There’s not much more we can add here as the buyers will just look for a bounce around these levels, while the sellers will want to see the price breaking below the major trendline.
GBPUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have a downward minor trendline now defining the current bearish momentum on this timeframe. The sellers will likely lean on it to position for a break below the major trendline, while the buyers will want to see the price breaking higher to increase the bullish bets into new highs. The red lines define the average daily range for today.
Upcoming Catalysts
Today we get the US ADP report. Tomorrow, we get the latest US Jobless Claims figures and the US ISM Services PMI. Finally, on Friday, we conclude the week with the US NFP report.
