Fundamental Overview
The USD weakened across the board last Friday following the soft US NFP report. The data showed some more labour market cooling with an increase in the unemployment rate and a decrease in wage growth. We basically have an economy that is slowing but still growing.
We will see if the market will be able to keep the positive sentiment on soft landing hopes or start to worry about a recession. Yesterday, Fed Chair Powell testified to Congress but he didn't offer anything in terms of forward guidance as they want to see more data before signalling any action.
The GBP, on the other hand, gained last week against the US Dollar mainly because of the risk-on sentiment as the US data continued to support at least two rate cuts from the Fed but didn’t send recessionary signals. This week, we are seeing a consolidation as the market awaits the US CPI and Jobless Claims figures tomorrow.
On the monetary policy front, the BoE in June left the door open for a rate cut in August with the market probability standing at 60%. The next UK CPI report on July 17th will likely decide whether the central bank will be able to deliver the first cut in August or wait some more time.
GBPUSD Technical Analysis – Daily Timeframe
On the daily chart, we can see that GBPUSD is struggling around the 1.28 resistance as the market awaits the release of the US CPI and Jobless Claims figures tomorrow. This is where the sellers continue to step in with a defined risk above the resistance to position for a drop back into the 1.2635 support. The buyers, on the other hand, will want to see the price breaking higher to increase the bullish bets into the 1.29 handle next.
GBPUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that from a risk management perspective, the buyers will have a better risk to reward setup around the 1.2750 level where we can find the confluence of the previous swing level and the 38.2% Fibonacci retracement level. The sellers, on the other hand, will want to see the price breaking lower to increase the bearish bets into the 1.2635 support.
GBPUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we are seeing some pickup in bullish momentum today although the buyers will want to see the price breaking above the most recent lower high at 1.2825 before piling in with more conviction. On the other hand, a break below the minor counter-trendline might lead to an increase in the bearish momentum and provide the correction into the 1.2750 level. The red lines define the average daily range for today.
Upcoming Catalysts
Tomorrow will be the most important day of the week as we get the US CPI and the US Jobless Claims figures. On Friday, we conclude the week with the US PPI and the University of Michigan Consumer Sentiment survey.