The Fed hiked interest rates by 25 bps yesterday as expected and left the policy statement unchanged. The market wanted to see if Fed Chair Powell could offer some hints on their next moves, but unfortunately, he just repeated that they are data dependent and that all options are on the table for the September meeting.
Conversely, the UK CPI last week missed expectations across the board and triggered a big repricing in interest rates expectations. In fact, the market was pricing a higher chance of a 50 bps hike prior to the report given the higher wages data in the previous UK employment report. Now, the market sees a higher chance that the BoE hikes by 25 bps at the upcoming meeting.
GBPUSD Technical Analysis – Daily Timeframe
On the daily chart, we can see that the price has bounced on the previous swing high resistance turned support where we had also the confluence with the red 21 moving average which continues to be a great dynamic support. If this is the start of another rally, the target should be the 1.33 handle.
GBPUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we had also the 61.8% Fibonacci retracement level near the 1.2847 support. The market structure now is bullish as the price keeps printing higher highs and higher lows and the moving averages are crossed to the upside.
GBPUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we already had signs of a possible pullback or reversal as the price was diverging with the MACD falling into the support zone. In fact, that’s a sign of weakening momentum and we saw the sellers folding as the buyers outplayed them. The price is now breaking above a key resistance level and the buyers should pile in even more aggressively to target the 1.33 handle. The sellers, on the other hand, will want to see the breakout failing and the price falling below the black trendline to pile in and target a break below the 1.2847 support area.
Upcoming Events
Today the market will focus on the US Jobless Claims data as the labour market strength is what keeps the Fed on the hawkish side. A big beat should give the USD a tailwind, while a big miss should weaken it even more. Tomorrow, the market will switch its attention to the US PCE and ECI reports with the wages data likely to be more important.
