FUNDAMENTAL
OVERVIEW
USD:
The US dollar weakened
across the board earlier this week as oil prices fell following G7 discussion
about emergency oil reserves release. The move accelerated after Trump told CBS
that “the war could be over soon.” Traders began unwinding some of their
positions, as expectations of a quick resolution led markets to dial back
hawkish interest-rate bets, putting pressure on the greenback.
However, the trend reversed
after reports that US intelligence had detected signs Iran might be deploying
mines in the Strait of Hormuz, pushing markets back into risk-off mode. Oil
prices started rising again, and hawkish rate expectations quickly returned.
Yesterday, Trump told Axios
that there is practically nothing left to target in Iran and that the war will
end soon. Unfortunately, markets no longer seem to be buying the “war ending
soon” narrative. His comments were largely ignored, as traders now want to see
a clear and definitive end to the conflict. Until that happens, the US dollar
is likely to remain supported.
GBP:
On the GBP side, traders
have erased all expectations of rate cuts and are now pricing in around a 40%
chance of a rate hike by year-end. A similar shift has taken place across
several other central banks, as higher oil prices have led markets to
anticipate stronger inflation in the coming months and less room for
policymakers to ease rates.
On the data front, there
hasn’t been much to drive markets in the meantime. Tomorrow we’ll get the UK’s
monthly GDP report, but it will likely be ignored since all the pre-war data is
old news.
GBPUSD TECHNICAL
ANALYSIS – DAILY TIMEFRAME
GBPUSD – daily
On the daily chart, we can
see that GBPUSD rejected the major downward
trendline and started falling again as US dollar bids returned. The sellers
will likely continue to lean on the trendline with a defined risk above it to
keep pushing into new lows, while the buyers will want to see the price
breaking higher to pile in for a rally into the 1.36 handle next.
GBPUSD TECHNICAL ANALYSIS –
4 HOUR TIMEFRAME
GBPUSD – 4 hour
On the 4 hour chart, we
have an upward trendline that could act as support. From a risk management
perspective, the buyers will have a better risk to reward setup around the trendline
to position for a break above the major downward trendline and target new
highs. The sellers, on the other hand, will look for a break below the upward
trendline to increase the bearish bets into new lows.
GBPUSD TECHNICAL ANALYSIS –
1 HOUR TIMEFRAME
GBPUSD – 1 hour
On the 1 hour chart, we
have a minor downward trendline defining the bearish momentum on this timeframe.
The sellers will likely continue to lean on the trendline with a defined risk
above it to keep pushing into new lows, while the buyers will look for a break
higher to start targeting a break above the major downward trendline. 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, the University of Michigan Consumer Sentiment
survey and the Job Openings data. As a reminder, the market focus right now is
solely on the US-Iran war, so the data might not matter much.
