GBPUSD Technical Analysis – NFP in focus

The US economic data has
been surprising to the upside since the last FOMC, and this has made the market
to reprice interest rates expectations on the more hawkish side. In fact, Fed
Chair Powell and other Fed members said that two or more rate hikes this year
seem appropriate if the data remains strong.

Conversely, the BoE
surprised with a 50 bps rate hike at the last meeting due to a very strong
employment report and hot inflation data prior to the meeting. BoE’ Governor
Bailey said that they remain data dependent and will do what is necessary to
bring inflation back to target. The market is now pricing 6.5% as the terminal
rate for the BoE, which is even higher than the Fed’s one.

GBPUSD Technical Analysis –
Daily Timeframe

On the daily chart, we can see that the red 21 moving
acted as support for the buyers and the price rallied back above
the 1.2680 level. This week the price action has been choppy and rangebound as
you would expect when there’s a big event and the market is uncertain on the
next direction. A lot will revolve on the data going forward.

GBPUSD Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see that the price has
rallied above the 1.2680 level and then retested the level multiple times. This
makes it a strong support
and if the price breaks below it, the sellers will pile in aggressively to extend
the fall into the trendline
and then target a breakout.

GBPUSD Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see that the
buyers tried to start a rally but got smacked back down from the 1.2760 swing
high resistance. We can also notice a divergence
with the MACD,
which is generally a sign of weakening momentum. The price will need to break
above the 1.2760 resistance to give the buyers conviction to pile in and target
the 1.2847 high.

Upcoming Events

Today we will finally see
the latest US NFP report. Given the strong labour market data we got in the
past days, the market’s expectations are skewed to the upside, so only a big
beat or a miss would be surprising. In case we get a big beat, the USD is
likely to appreciate as the market will price in some more hawkishness for the
Fed. On the other hand, if the data misses, the USD should be offered across
the board in the short term as the market will price out the hawkishness.

See also the video below:

This article was written by FL Contributors at Source