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 recent US CPI missed expectations across the board bringing the expectations for rate cuts forward.
- The labour market is starting to show weakness as Continuing Claims are now rising at a fast pace and the recent NFP report missed across the board. Last week though, the US Jobless Claims beat forecasts by a big margin, although volatility in the data is normal.
- The latest US PMIs came basically in line with expectations with a miss in the Manufacturing index and a beat in the Services measure.
- The recent Fedspeak has been leaning on the hawkish side, but the recent data suggest that the Fed is likely done for the cycle.
- The market doesn’t expect the Fed to hike anymore.
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 UK CPI missed expectations across the board, which was a welcome development for the BoE.
- The UK PMIs last week 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 doesn’t expect the BoE to hike anymore.
GBPUSD Technical Analysis – Daily Timeframe
On the daily chart, we can see that GBPUSD breached the key resistance around the 1.26 handle where we had also the 50% Fibonacci retracement level for confluence. The price looks a bit overstretched though as depicted by the distance from the blue 8 moving average. In such instances, we can generally see a pullback into the moving average or some consolidation before the next move.
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 now. This is generally a sign of weakening momentum often followed by pullbacks or reversals. Given that we are around the key resistance that should be a call for caution. From a risk management perspective, the buyers would have a much better risk to reward setup around the trendline where we can also find the 61.8% Fibonacci retracement level for confluence.
GBPUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have another divergence with the MACD right above the key resistance. We might end up with a classic “break and retest” pattern with the buyers leaning on the resistance turned support with a defined risk below the trendline. The sellers, on the other hand, will want to see the price breaking below the trendline to invalidate the bullish setup and position for a drop into the major trendline around the 1.24 handle.
Upcoming Events
Today, we will get the latest US Consumer Confidence report and it will be interesting to see how the US consumers see the labour market. On Thursday, we will see the US PCE and US Jobless Claims data with the market likely focusing more on the latter given that we already saw the latest inflation data with the US CPI report just two weeks ago. Finally, on Friday, we conclude the week with the US ISM Manufacturing PMI which missed expectations by a big margin the last time.
