Fundamental
Overview
The USD got a boost from
the FOMC decision as the market perceived it as more
hawkish than expected. Overall, apart from some slight tweaks, the Fed matched
the market’s pricing. Nonetheless, the market reacted in a big way pushing
Treasury yields higher and giving the USD a tailwind.
The data is what really
matters now as it will decide what the Fed is going to do. They switched their
focus on inflation again, so it will likely take just one soft CPI report in
January to see the market reacting in a dovish way sending Treasury yields and
the US Dollar lower.
On the GBP side, BoE
kept the Bank Rate unchanged yesterday as expected although we got a more
dovish than expected vote split as 3 voters wanted a rate cut compared to just
1 expected.
The market is pricing a 55%
chance of no change at the upcoming meeting in February and a total of 56 bps
of easing by the end of 2025 which is slightly more than it was before the BoE
decision.
GBPUSD
Technical Analysis – Daily Timeframe
GBPUSD Daily
On the daily chart, we can
see that GBPUSD eventually fell all the way back to the November low around the
1.2485 level. This is where we can expect the buyers to step in with a defined
risk below the level to position for a rally into the 1.28 handle. The sellers,
on the other hand, will want to see the price breaking lower to increase the
bearish bets into the 1.23 handle next.
GBPUSD Technical
Analysis – 4 hour Timeframe
GBPUSD 4 hour
On the 4 hour chart, we can
see that we have a strong resistance
zone now around the 1.26 handle. From a risk management perspective, the
sellers will have a better risk to reward setup around the resistance, while
the buyers will look for a break higher to increase the bullish bets into the
1.28 handle.
GBPUSD Technical
Analysis – 1 hour Timeframe
GBPUSD 1 hour
On the 1 hour chart, there’s
not much else we can add here as the buyers will look for a pullback into the
1.26 handle, while the sellers will look for a break lower or wait for the
pullback to short at better levels. The red lines define the average daily range for today.
Upcoming
Catalysts
Today, we conclude the week with the US PCE data.
