Fundamental
Overview
The USD rallied across the
board yesterday after a slate
of strong US data. The focus was mainly on Jobless
Claims which beat expectations by a big margin with Initial Claims falling
to the lowest level since July and Continuing Claims improving further. This
triggered a hawkish repricing in interest rates expectations with the market
now seeing 39 bps of easing by year-end vs 44 bps previously and 101 bps by the
end of 2026 vs 113 prior.
Fed speakers this week
haven’t offered anything new and just reiterated that the labour market
weakness “forced” them to move towards neutral. This means that if we continue to
get stronger labour market data, the Fed could start turning more hawkish again
and we might not get another cut in October or December. Therefore, there’s
still plenty of room for the US dollar to appreciate as the market’s pricing
remains too dovish.
On the GBP side, the BoE left
interest rates unchanged at the last meeting but slowed the pace of QT. The
forward guidance was mostly the same with the focus being more on the inflation
side now. The UK continues to have a serious inflation problem with high core
CPI, high wages and rising consumer inflation expectations. The market is pricing
just 5 bps of easing by year-end and 36 bps by the end of 2026.
GBPUSD
Technical Analysis – Daily Timeframe
GBPUSD daily
On the daily chart, we can
see that GBPUSD dropped into the key swing level at 1.3334. This is where the
buyers stepped in with a defined risk below the level to position for a rally
back into the 1.3588 resistance.
The sellers, on the other hand, will want to see the price breaking lower to
increase the bearish bets into the 1.3140 level next.
GBPUSD Technical Analysis – 4 hour Timeframe
GBPUSD 4 hour
On the 4 hour chart, we can
see that we now have a downward trendline defining the bearish momentum. In
case we get a pullback into the trendline, we can expect the sellers to lean on
it with a defined risk above it to position for a drop into new lows. The
buyers, on the other hand, will look for a break higher to increase the bullish
bets into the 1.3588 level next.
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 sellers will have a better risk to reward
setup around the trendline, while the buyers will likely continue to step in
around the swing level. A break below the 1.3334 level should open the door for
new lows. The red lines define the average daily range for today.
Upcoming Catalysts
Today we conclude the week with the US PCE and the final
University of Michigan Consumer Sentiment report.
