Fundamental Overview
The USD rallied across the board last week after a slate of strong US data. The focus was mainly on Jobless Claims which beat expectations by a big margin with Initial Claims falling to the lowest level since July and Continuing Claims improving further. This triggered a hawkish repricing in interest rates expectations since the Fed started cutting rates solely due to weaker labour market data.
This means that if we continue to get stronger labour market data, the Fed could start turning more hawkish again and we might not get another cut in October, or more probably in December. Therefore, there’s still plenty of room for the US dollar to appreciate in case of strong data as the market’s pricing remains too dovish. The Fed projected 75 bps of easing by the end of 2026, while the market is still pricing 104 bps.
The greenback erased all the gains triggered by last week’s data in the meantime as we are likely experiencing a pullback after a very strong rally. Other possible reasons include the government shutdown fears and quarter-end flows.
On the GBP side, we haven’t got any meaningful change in the fundamentals in the meantime. The BoE left interest rates unchanged at the last meeting but slowed the pace of QT. The forward guidance was mostly the same with the focus being more on the inflation side now. The UK continues to have a serious inflation problem with high core CPI, high wages and rising consumer inflation expectations. The market is pricing just 5 bps of easing by year-end and 36 bps by the end of 2026.
GBPUSD Technical Analysis – Daily Timeframe
On the daily chart, we can see that GBPUSD bounced on the key swing level at 1.3334 with the buyers now targeting a rally into the 1.3588 level. That’s where we can expect the sellers to step in with a defined risk above the level to position for a drop back into the 1.3334 level. In case, we reverse course earlier and the price breaks below the 1.3334 level, we can expect the sellers to increase the bearish bets into the 1.3140 level next.
GBPUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we had a downward trendline defining the bearish momentum that got breached. The buyers increased the bullish bets into the 1.3588 level as a result, while the sellers retrenched. There’s not much else we can glean from this timeframe, so we need to zoom in to see some more details.
GBPUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have a minor support around the 1.3410 level. If the price gets there, we can expect the buyers to step in with a defined risk below the level to keep pushing into new highs. The sellers, on the other hand, will look for a break lower to pile in for a drop back into the 1.3334 level next. The red lines define the average daily range for today.
Upcoming Catalysts
Tomorrow we get the US Job Openings data and the US Consumer Confidence report. On Wednesday, we have the US ADP and the US ISM Manufacturing PMI. On Thursday, we get the latest US Jobless Claims figures. On Friday, we conclude the week with the US NFP report and the US ISM Services PMI. Keep also an eye on Fed speakers.
