USD
- The Fed left interest rates unchanged as expected at the last meeting with basically no change to the statement.
- Fed Chair Powell stressed once again that they are proceeding carefully as the full effects of policy tightening have yet to be felt.
- The US Core PCE last week came in line with forecasts with the disinflationary progress continuing steady.
- The labour market continues to show weakness as Continuing Claims are now rising at a fast pace with the last NFP report missing across the board and this week’s Job Openings and ADP coming below forecasts.
- The ISM Manufacturing PMI last week missed expectations falling further into contraction, while the ISM Services PMI this week beat forecasts holding on in expansion.
- The hawkish Fed members recently shifted their stance to a more neutral position.
- The market expects the Fed to start cutting rates as soon as Q1 2024.
GBP
- The BoE kept interest rates unchanged as expected at the last meeting.
- The central bank is leaning towards keeping interest rates “higher for longer”, although it keeps a door open for further tightening if inflationary pressures were to be more persistent.
- The BoE members continue to repeat that they will keep rates high for long enough to get inflation back to target.
- The latest employment report beat expectations with wage growth remaining at elevated levels.
- The recent UK CPI missed expectations across the board, which was a welcome development for the BoE.
- The UK PMIs beat expectations on both the Manufacturing and Services measures, with the Services sector crawling back in expansion.
- The latest UK Retail Sales missed expectations across the board by a big margin as consumer spending remains weak.
- The market expects the BoE to start cutting rates in Q2 2024
GBPUSD Technical Analysis – Daily Timeframe
On the daily chart, we can see that GBPUSD broke out of the range yesterday with the price eventually bouncing near the red 21 moving average. This breakout to the downside should give the sellers more conviction to target a drop into the swing low around the 1.2375 level, while the buyers will need the price to rise above the 50% Fibonacci retracement level again to invalidate the breakout and leave behind a fakeout, which is generally a reversal pattern.
GBPUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the pair has been diverging with the MACD for quite some time as it approached the key resistance levels. This is generally a sign of weakening momentum often followed by pullbacks or reversals. In this case, given the breakout of the range to the downside, the odds for a drop into the 1.2375 support are higher. The sellers should step in around the broken support now turned resistance to target the next support. The buyers, on the other hand, will want to see the price breaking higher again to invalidate the bearish setup and pile in for a rally into the 1.2743 resistance.
GBPUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that on this timeframe the sellers have also the confluence with the trendline, the 50% Fibonacci retracement level and the red 21 moving average around the key 1.2590 level. What happens here is likely to determine where the pair will go in the next few weeks.
Upcoming Events
Today we get the latest US Jobless Claims figures where the market will want to see how fast the US labour market is weakening. Tomorrow, we conclude the week with the US NFP report which is going to be a big market moving event. We might be reaching a point where bad US data is starting to weigh on the general risk sentiment, so that’s something to watch out for if the USD gets bid even after weak figures.
