Fundamental
Overview
The USD came back with a
vengeance last Friday following the strong US
NFP report where the data surprised with solid job and wage growth. There
were also negatives like the uptick in the unemployment rate, but all in all,
we can say that it was a good report.
The data triggered a
hawkish repricing in interest rates expectations with the market now expecting
once again just one cut by the end of the year. It’s not a big deal in the
bigger picture, but for now the sentiment is bullish for the greenback and we will
likely need a catalyst to change it again.
The GBP, on the other hand,
has been supported by the risk-on sentiment and general US Dollar weakness before
the NFP report. Today, we got another disappointing UK
labour market report where we saw the unemployment rate increasing further,
job losses and wage growth remaining sticky at elevated levels.
The data didn’t change much
markets expectations as the first cut is still seen in November with a total of
35 bps of easing expected by the end of the year compared to 30 bps before the
jobs data. The Bank of England is more focused on the inflation data, so that’s
what will influence the market pricing the most. Nevertheless, if we go back
into risk-on sentiment, the greenback could start to lose ground against the
Pound again.
GBPUSD
Technical Analysis – Daily Timeframe
GBPUSD Daily
On the daily chart, we can
see that GBPUSD couldn’t break above the 1.28 handle and eventually dropped back
into the 1.27 handle following the US NFP release. We can see that the 1.27
handle is a strong support
as we can also find the trendline
for confluence.
This is where we can expect
the buyers to step in with a defined risk below the trendline to position for a
rally into the 1.29 handle. The sellers, on the other hand, will want to see
the price breaking lower to start looking for new lows with the 1.26 handle as
the first target.
GBPUSD Technical
Analysis – 4 hour Timeframe
GBPUSD 4 hour
On the 4 hour chart, we can
see that we have the 50% Fibonacci retracement level around the 1.2634 level which
is going to be the first target for the sellers in case the price breaks below
the 1.27 support zone.
That’s also where we can
expect the buyers coming back buying the dip and position for new highs with a better
risk to reward setup. A lot will be decided by the US CPI report tomorrow where
hot data should strengthen the US Dollar further while soft figures should see
the greenback getting sold across the board.
GBPUSD Technical
Analysis – 1 hour Timeframe
GBPUSD 1 hour
On the 1 hour chart, we can
see that we have a good resistance at the 1.2740 level where we can find the
confluence of the 38.2% Fibonacci retracement level. The sellers leant on this
zone and positioned for a continuation of the downtrend looking for a break
below the trendline.
The buyers will want to see
the price breaking above the resistance to gain even more conviction and
increase the bullish bets into the 1.29 handle. The red lines define the average
daily range for today.
Upcoming
Catalysts
This week is a bit empty on the data front although we will
have the biggest market moving events tomorrow when we get the US CPI data and
the FOMC rate decision. On Thursday, we have the US PPI and the latest US
Jobless Claims figures. On Friday, we conclude the week with the University of
Michigan Consumer Sentiment survey.