The US economic data has been surprising to the upside since the last FOMC, and this has made the market to reprice interest rates expectations on the more hawkish side. In fact, Fed Chair Powell and other Fed members said that two or more rate hikes this year seem appropriate if the data remains strong.
Conversely, the BoE surprised with a 50 bps rate hike at the last meeting due to a very strong employment report and hot inflation data prior to the meeting. BoE’ Governor Bailey said that they remain data dependent and will do what is necessary to bring inflation back to target. The market is now pricing 6.5% as the terminal rate for the BoE, which is even higher than the Fed’s one.
GBPUSD Technical Analysis – Daily Timeframe
On the daily chart, we can see that the red 21 moving average acted as support for the buyers and the price rallied back above the 1.2680 level. This week the price action has been choppy and rangebound as you would expect when there’s a big event and the market is uncertain on the next direction. A lot will revolve on the data going forward.
GBPUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the price has rallied above the 1.2680 level and then retested the level multiple times. This makes it a strong support and if the price breaks below it, the sellers will pile in aggressively to extend the fall into the trendline and then target a breakout.
GBPUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the buyers tried to start a rally but got smacked back down from the 1.2760 swing high resistance. We can also notice a divergence with the MACD, which is generally a sign of weakening momentum. The price will need to break above the 1.2760 resistance to give the buyers conviction to pile in and target the 1.2847 high.
Upcoming Events
Today we will finally see the latest US NFP report. Given the strong labour market data we got in the past days, the market’s expectations are skewed to the upside, so only a big beat or a miss would be surprising. In case we get a big beat, the USD is likely to appreciate as the market will price in some more hawkishness for the Fed. On the other hand, if the data misses, the USD should be offered across the board in the short term as the market will price out the hawkishness.
See also the video below:
