FUNDAMENTAL OVERVIEW
USD:
The US Dollar had a good run last week on some unwinding of overstretched US Dollar shorts and mostly stronger US data. The bullish momentum eventually faded as we got a very weak US Job Openings report that coupled with the selloff in the stock market weighed on the market pricing. The focus has now turned to the US NFP report on Wednesday as that’s going to be pivotal for the US Dollar.
In fact, the market is pricing 54 bps of easing for the Fed this year, so there’s a high risk of a hawkish repricing in case the data comes out strong. In such a scenario, we will likely see the greenback rallying across the board.
On the other hand, a weak report should strengthen the case for more Fed easing and might even see traders bringing forward rate cut bets as some Fed members expressed scepticism about labour market stabilisation. In that case, the US Dollar will likely come under renewed pressure on dovish Fed bets.
GBP:
On the GBP side, the BoE surprised with a dovish hold last week as 4 members dissented for a rate cut versus the 2 expected. Moreover, they changed the guidance in the statement from "the bank rate is likely to continue on a gradual downward path" to "the bank rate is likely to be reduced further". A clear dovish guidance.
Inflation forecasts were also revised much lower across the board. Lastly, the Agents' Pay Survey showed wage growth to average 3.4% in 2026 vs 3.5% expected. Traders are now pricing a 60% chance of a rate cut at the next meeting already. The data will still guide the central bank's decisions but for now the expectations are for a more dovish path.
GBPUSD TECHNICAL ANALYSIS – DAILY TIMEFRAME
On the daily chart, we can see that GBPUSD experienced a meaningful pullback soon after breaking into a new cycle high. We had a major trendline around the 1.3450 level where the dip-buyers could have stepped in to position for new highs, but the price bounced near the 1.35 handle. There’s not much we can glean from this timeframe so we need to zoom in to see some more details.
GBPUSD TECHNICAL ANALYSIS – 4 HOUR TIMEFRAME
On the 4 hour chart, we can see that we have a downward trendline defining the bearish momentum on this timeframe. The sellers will likely lean on the trendline with a defined risk above it to position for a drop into the major trendline targeting a breakout. The buyers, on the other hand, will look for a break higher to increase the bullish bets into a new cycle high.
GBPUSD TECHNICAL ANALYSIS – 1 HOUR TIMEFRAME
On the 1 hour chart, we can see that we have a minor support zone around the 1.3590. If the price pulls back into the support, we can expect the buyers to step in with a defined risk below the support to position for a break above the trendline. The sellers, on the other hand, will look for a break lower to increase the bearish bets into the major trendline. The red lines define the average daily range for today.
UPCOMING CATALYSTS
Tomorrow we get the US December Retail Sales and the US Employment Cost Index data. On Wednesday, we have the US NFP report. On Thursday, we get the UK Q4 GDP and the US Jobless Claims figures. On Friday, we conclude the week with the US CPI report.
