Fundamental
Overview
The USD has been marginally
weaker recently due to lower than expected US inflation figures last week that
sent Treasury yields lower and made the market to price in higher chances of a
second rate cut by the end of the year.
We’ve also got lots of
whipsaws in the last couple of days caused by tariffs headlines. On Monday, the
greenback weakened across the board following a WSJ report saying that Trump would lay out the
trade vision but won’t impose tariffs yet.
Yesterday, on the other
hand, the US Dollar strengthened as Trump spoke to the media and said that he intends to impose 25% tariffs on Canada and Mexico next week.
Those gains were later erased, but Trump definitely brought more volatility.
On the GBP side, the UK CPI report last week missed expectations across
the board by a big margin and strengthened the markets expectations for a 25
bps cut at the upcoming BoE meeting. The UK Employment report this week showed once again
weakness in the labour market although wage growth remains pretty hot.
As a reminder, the BoE kept the Bank Rate unchanged as expected at
the last policy decision but we got a more dovish than expected vote split as 3
voters wanted a rate cut compared to just 1 expected. Policymakers continue to
lean towards four rate cuts for this year compared to just two expected by the
market.
GBPUSD
Technical Analysis – Daily Timeframe
GBPUSD Daily
On the daily chart, we can
see that GBPUSD is testing a key resistance zone around the 1.2350 level. This
is where we can expect the sellers to step in with a defined risk above the
resistance to position for a drop back into the lows. The buyers, on the other
hand, will want to see the price breaking higher to increase the bullish bets
into the major trendline.
GBPUSD Technical
Analysis – 4 hour Timeframe
GBPUSD 4 hour
On the 4 hour chart, we can
see that we now have an upward trendline defining the current bullish momentum.
If the price were to pull back into it, we can expect the buyers to lean on the
trendline to position for a rally into the major trendline. The sellers, on the
other hand, will want to see the price breaking lower to increase the bearish
bets into new lows.
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 break higher to
target the major trendline, while the sellers will look for a rejection to
position for the pullback into the upward trendline. The red lines define the average daily range for today.
Upcoming
Catalysts
Tomorrow we get the latest US Jobless Claims figures, while on
Friday we conclude the week with the Flash UK and US PMIs.