The US CPI report missed expectations across the board causing a big weakening in the US Dollar. The market started to price out additional rate hikes in the future but maintained the July rate hike odds unchanged. This may be due to the tightness in the labour market and the lack of hints of another skip or pause from Fed members after the CPI release.
Conversely, the UK employment report recently missed expectations on the jobs side but showed another upside surprise on the wages side. This should keep the BoE on track to hike interest rates with the CPI report the next week being the decision maker between a 25 bps increase or another 50 bps hike.
GBPUSD Technical Analysis – Daily Timeframe
On the daily chart, we can see that since the bounce on the red 21 moving average, GBPUSD rallied with almost no pullbacks. The price is now overextended though as depicted by the distance from the blue 8 moving average. Generally, we can see some consolidation or a pullback into the moving average before the resumption in the trend.
GBPUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we had a minor pullback once the price hit the previous high at 1.2847 and the following bounce from the previous swing high level. The price then took off and went parabolic. The moving averages should act as dynamic support for the current trend and the buyers are likely to lean on them to position for more higher highs.
GBPUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that from a risk management perspective, the buyers would be better off to wait for a pullback into the black trendline where they will have the confluence of the Fibonacci retracement levels, the 1.30 round number and the 4-hour red 21 moving average. The sellers, on the other hand, will want to wait for the price to break below the trendline to start piling in and target the 1.2847 support.
Upcoming Events
Today the only notable data on the docket is the University of Michigan Consumer Sentiment report. Only big deviations are likely to be market moving and the market is likely to focus particularly on the inflation expectations figures.
