Fundamental
Overview
The USD recovered most of
the losses triggered by Powell’s dovish tilt at the Jackson Hole Symposium
before giving the gains back yesterday. Traders are now focused on the US
labour market data due next week that will culminate with a crucial NFP report
on Friday. In fact, the data will influence interest rates expectations
greatly.
Right now, the market is
pricing an 89% probability of a rate cut in September and a total of 55 bps of
easing by year-end. Strong data might take the probability for a September cut
towards a 50/50 chance but will certainly see a more hawkish repricing further
down the curve and support the dollar. Soft data, on the other hand, will
likely see traders increasing the dovish bets with a third cut by year-end
being priced in and weighing on the greenback.
On the GBP side, the BoE delivered
a hawkish cut at the last meeting and since then the data has been coming on
the hotter side. In fact, the latest UK CPI surprised once again to the upside
and last week’s Flash PMIs, although mixed, showed strength and persistent
inflationary pressures.
Inflation should be the
central bank’s biggest concern even if it takes labour market weakness to get
back to 2%. Core inflation has never fallen below 3% since 2021. That’s a long
time and might have influenced negatively inflation expectations, making a
return to 2% even harder.
GBPUSD
Technical Analysis – Daily Timeframe
GBPUSD Daily
On the daily chart, we can
see that GBPUSD continues to trade between the 1.3590 resistance
and the 1.3368 support. The price is now slowly rising back into the resistance
and if it gets there, we can expect the sellers to step in with a defined risk
above the resistance to position for a drop back into the support. The buyers,
on the other hand, will want to see the price breaking higher to increase the
bullish bets into the 1.3790 level next.
GBPUSD Technical
Analysis – 4 hour Timeframe
GBPUSD 4 hour
On the 4 hour chart, we can
see that we had a minor downward trendline defining the pullback after
the rally triggered by Powell’s dovish tilt. The price broke higher yesterday
and the buyers piled in to target a rally into the resistance. There’s not much
else we can glean from this timeframe, so we need to zoom in to see some more
details.
GBPUSD Technical
Analysis – 1 hour Timeframe
GBPUSD 1 hour
On the 1 hour chart, we can
see that the buyers stepped in around the most recent swing low at 1.3486. This
should act as a minor support in case we get another pullback into it. The
buyers will likely step in again there, while the sellers will look for a break
lower to target the 1.3368 support. The red lines define the average daily range for today.
Upcoming Catalysts
Today we get the latest US Jobless Claims
figures. Tomorrow, we conclude the week with the US PCE price index.
