The Fed members and Fed Chair Powell keep on repeating that they expect two or more rate hikes if the data remains strong. Since the last FOMC meeting, the data kept on surprising to the upside with very strong housing market indicators, solid US Jobless Claims, US Services PMI in expansion and a strong consumer confidence report. This has led to a more hawkish repricing in interest rates expectations that ultimately favoured the US Dollar.
The BoE surprised with a 50 bps rate hike last week as the incredibly strong employment report and a higher than expected core inflation figure made the central bank to lean for a more aggressive action. BoE’s Bailey has also said that they will do what is necessary to achieve their target and will be data dependent for rate hikes.
GBPUSD Technical Analysis – Daily Timeframe
On the daily chart, we can see that GBPUSD has fell below the 1.2680 support with conviction. We may now see the buyers waiting at the upward trendline to pile in with a defined risk below to target a new high. The sellers, on the other hand, will want to see the price breaking below the trendline to start getting aggressive on the downside and target the 1,23 swing low.
GBPUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we have some strong support levels near the trendline where we can find the 50% Fibonacci retracement level and the previous resistance turned support. The trend on this timeframe has been bearish as the price kept on printing lower lows and lower highs, but the downside momentum is starting to weaken right when we are getting near the trendline. It may be a sign of an incoming pullback or reversal.
GBPUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the price is in fact diverging with the MACD which is generally a sign of weakening momentum often followed by pullbacks or reversals. So, we may expect another push to the downside and then a deeper pullback into the 1.2680 resistance or the price breaking below the trendline with conviction invalidating the bullish setup and opening the door for a fall into the 1.23 handle. Alternatively, the buyers may also start to pile in as soon as the price breaks above the 1.2680 resistance. Today, the risk event to watch is the US PCE and we might get some dollar weakness if the data misses expectations and some strength if the data beats.
See also the video below:
