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 expects the first rate cut in June.
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 June.
GBPUSD Technical Analysis – Daily Timeframe
On the daily chart, we can see that GBPUSD recently probed above the top of the range around the 1.28 handle but got smacked back down soon after as stronger US data lifted the US Dollar across the board. The sellers piled in around the highs to position for a drop back into the bottom of the range around the 1.25 handle although they will need to break some key levels along the way. The buyers, on the other hand, will likely lean on the red 21 moving average to position for a rally back into the highs targeting a breakout.
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 1.25 handle.
GBPUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see more closely the recent price action with the pair approaching the key support zone. On an even lower timeframe you will notice that the price 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 lean on the trendline with a defined risk above it to position for another drop into the lows.
Upcoming Events
Today we conclude the week with the US Industrial Production data and the University of Michigan Consumer Sentiment survey.
