Fundamental
Overview
The USD strengthened a bit
on Friday following some positive Trump’s comments on China as Treasury yields
bounced and erased the Thursday’s losses. Overall, the US dollar performance
has been mixed as markets have been driven by quick changes in risk sentiment
since Trump’s tariffs threat.
On the domestic side, the
US government shutdown continues to delay many key US economic reports. The
dollar “repricing trade” needs strong US data to keep going, especially on the
labour market side, so any hiccup on that front is weighing on the greenback.
The BLS will release the US
CPI report on Friday despite the shutdown, so that’s going to be a key risk
event. That will need to be seen in the context of US-China relations and any
negative shock by that time though. If things go south, then the CPI will not
matter much as growth fears will trump everything else.
On the GBP side, we haven’t
got any meaningful change in the fundamentals. 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.
We saw some dovish
repricing following the soft UK employment report with the market now seeing 11
bps of easing by year-end and 50 bps by the end of 2026. This week we have the
UK CPI report which is going to be more important for the BoE.
GBPUSD
Technical Analysis – Daily Timeframe
GBPUSD daily
On the daily chart, we can
see that GBPUSD probed below the key 1.3332 level a couple of times in the past
two weeks but eventually the breakout got invalidated and the price bounced
back strongly. If the price rises all the way back to the 1.3588 level, we can
expect the sellers to step in there with a defined risk above the resistance to
position for a drop back into the 1.3332 level. The buyers, on the other hand,
will want to see the price breaking higher to increase the bullish bets into the
1.3789 level next.
GBPUSD Technical
Analysis – 4 hour Timeframe
GBPUSD 4 hour
On the 4 hour chart, we can
see that we have a minor support zone around the 1.3365 level. If we get a
pullback, we can expect the buyers to step in there with a defined risk below
the support to position for a rally into the 1.3588 level. The sellers, on the
other hand, will want to see the price breaking lower to pile in for a drop
into new lows.
GBPUSD Technical
Analysis – 1 hour Timeframe
GBPUSD 1 hour
On the 1 hour chart, we can
see that we have a minor resistance zone around the 1.3443 level. This is where
we can expect the sellers to step in with a defined risk above the resistance to
position for a pullback into the 1.3365 support. The buyers, on the other hand,
will look for a break higher to increase the bullish bets into new highs. The
red lines define the average daily range for today.
Upcoming Catalysts
On Wednesday, we have the
UK CPI report, while on Friday we get the US CPI and the US Flash PMIs data. Keep
in mind that the US-China developments continue to be a key market focus.
