USD
- The Fed left interest rates unchanged as expected at the last meeting and dropped the tightening bias in the statement.
- The US CPI and the US PPI beat expectations for the second consecutive month.
- The NFP report beat expectations on the headline number, but the unemployment rate and the average hourly earnings missed notably. Moreover, the US Jobless Claims yesterday beat expectations across the board with a big positive revision to Continuing Claims.
- The latest US ISM Manufacturing PMI missed expectations by a big margin remaining in contraction with the US ISM Services PMI following suit but holding on in expansion.
- The US Retail Sales missed expectations across the board although the data improved from the prior month.
- The market sees basically a 50/50 chance of a hike in June now.
GBP
- The BoE left interest rates unchanged as expected at the last meeting removing the tightening bias but reaffirming that they will keep rates high for sufficiently long to return to the 2% target.
- The employment report missed expectations with an uptick in the unemployment rate and an easing in wage growth.
- The UK CPI missed expectations across the board but with Services inflation remaining sticky, which continues to support the BoE’s patient stance.
- The latest UK PMIs improved from the prior month with the Services PMI beating expectations and the Manufacturing PMI missing.
- The market expects the first rate cut in August.
GBPUSD Technical Analysis – Daily Timeframe
On the daily chart, we can see that GBPUSD is now testing the 21 moving average, which stands around the previous swing high level. This is where we can expect the buyers to step in with a defined risk below the moving average to position for a rally back into the highs. The sellers, on the other hand, will want to see the price breaking lower to increase the bearish bets into the 1.2612 support.
GBPUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we have a strong support zone around the 1.27 handle where we can find the previous resistance turned support and the confluence with the 61.8% Fibonacci retracement level and the daily 21 moving average. This is where we can expect the buyers to step in with a defined risk below the support to position for a rally back to the highs. The sellers, on the other hand, will want to see the price breaking lower to invalidate the bullish setup and increase the bearish bets into the 1.2612 level.
GBPUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the latest leg lower is diverging with the MACD, which is generally a sign of a weakening momentum often followed by pullbacks or reversals. In this case, it should be another bullish confluence for the buyers and give them even more conviction for a rally back to the highs. If we do get a pullback from these levels, the sellers will likely step in around the trendline where they will also find the 50% Fibonacci retracement level for confluence.
Upcoming Events
Tomorrow we have the UK CPI and the FOMC rate decision on the agenda where the central bank is expected to keep rates unchanged. On Thursday, we have the BoE rate decision where the central bank is expected to keep rates unchanged. Moreover, we get the US Jobless Claims figures and the latest UK and US PMIs. Finally, on Friday, we conclude the week with the UK Retail Sales data.
