USD

  • The Fed left interest rates unchanged as expected at the last meeting with basically no change to the statement.
  • Fed Chair Powell stressed once again that they are proceeding carefully as the full effects of policy tightening have yet to be felt.
  • The US Core PCE last week came in line with forecasts with the disinflationary progress continuing steady.
  • The labour market is starting to show weakness as Continuing Claims are now rising at a fast pace and the recent NFP report missed across the board.
  • The ISM Manufacturing PMI last week missed expectations falling further into contraction.
  • The recent US Consumer Confidence report beat expectations although the details about the labour market continued to weaken.
  • The hawkish Fed members recently shifted their stance to a more neutral position.
  • The market expects the Fed to start cutting rates as soon as Q1 2024.

GBP

  • The BoE kept interest rates unchanged as expected at the last meeting.
  • The central bank is leaning towards keeping interest rates “higher for longer”, although it keeps a door open for further tightening if inflationary pressures were to be more persistent.
  • The BoE members continue to repeat that they will keep rates high for long enough to get inflation back to target.
  • The latest employment report beat expectations with wage growth remaining at elevated levels.
  • The recent UK CPI missed expectations across the board, which was a welcome development for the BoE.
  • The UK PMIs beat expectations on both the Manufacturing and Services measures, with the Services sector crawling back in expansion.
  • The latest UK Retail Sales missed expectations across the board by a big margin as consumer spending remains weak.
  • The market expects the BoE to start cutting rates in Q3 2024

GBPUSD Technical Analysis – Daily Timeframe

GBPUSD Technical Analysis
GBPUSD Daily

On the daily chart, we can see that GBPUSD got stuck in a range between the 50% and the 61.8% Fibonacci retracement levels as the market is probably waiting for a catalyst to choose the next direction. A break to the upside should see the pair reaching the 1.30 handle, while a break to the downside is likely to trigger a selloff at least into the 1.22 handle.

GBPUSD Technical Analysis – 4 hour Timeframe

GBPUSD Technical Analysis
GBPUSD 4 hour

On the 4 hour chart, we can see that the pair has been diverging with the MACD for quite some time now. This is generally a sign of weakening momentum often followed by pullbacks or reversals. The tight range between the 1.26 support and the resistance at 1.2730 gives us a clear playbook as a break to the downside should confirm the divergence and likely lead to a drop into the base of the divergent formation around the 1.2370 level. On the other hand, a break to the upside could invalidate the bearish setup and trigger a rally into the 1.30 level.

GBPUSD Technical Analysis – 1 hour Timeframe

GBPUSD Technical Analysis
GBPUSD 1 hour

On the 1 hour chart, we can see more closely the rangebound price action between the Fibonacci levels with a divider in between kind of acting as a barometer for the short term sentiment. There’s not much to do here other than waiting for a clear breakout, especially if supported by a fundamental catalyst.

Upcoming Events

This week we will see lots of US labour market data culminating with the NFP release on Friday. Today, we have the ISM Services PMI and the US Job Openings reports. Tomorrow, we will get the US ADP data. On Thursday, it will be the time for the US Jobless Claims figures, while on Friday we conclude the week with the NFP report.