The US NFP last Friday has finally missed expectations for the first time after 14 consecutive beats. The other details in the report though were almost all good and the average hourly earnings ticked higher, which is not what the Fed would want to see. In fact, the NFP report didn’t change the market’s expectation for the next FOMC rate decision and a 25 bps hike is still basically priced in.
Conversely, the UK employment report this morning missed expectations on the jobs side but saw another upside surprise on the wages side. This should keep the BoE on track to hike interest rates and the CPI report the next week might decide if it’s going to be a 25 bps increase or another 50 bps hike.
GBPUSD Technical Analysis – Daily Timeframe
On the daily chart, we can see that GBPUSD since bouncing on the red 21 moving average, extended the rally past the 1.2847 high and it’s now looking at the 1.30 handle. At the moment there’s no clear resistance level where the sellers can lean on to and therefore it’s a buyers’ market. The price would need to fall below the 1.2847 high to see more sellers piling in and targe the trendline.
GBPUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the buyers leant on the previous swing high level and the red 21 moving average to start a rally towards the 1.30 handle. From a risk management perspective, the buyers should now wait for the price to pull back into the 1.2847 resistance turned support before engaging in new longs as the price has now overextended.
GBPUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the we are starting to see a divergence with the MACD which is generally a sign of weakening momentum often followed by pullbacks or reversals. In fact, as mentioned above, a good spot for the buyers to enter new long positions would be the 1.2847 level where there’s also the red 21 moving average for confluence. If the price falls below that level, the sellers will start to pile in and target the 1.2750 level first and the 1.26 handle next.
Upcoming Events
Tomorrow we will see the latest US CPI report, which will be the main event of the week. Higher than expected figures, especially on the core numbers, should support the USD as the market will price in a more hawkish Fed. Conversely, if the data misses expectations, we should see a weaker greenback in the short term as the market will price out the probabilities of more hikes and even price in rate cuts. After the CPI report we will finish the week with the US Jobless Claims on Thursday and the University of Michigan Consumer Sentiment on Friday.
See also the video below:
