GBPUSD Technical Analysis – Reversal signs are emerging

week, the US CPI came
basically in line with expectations, but the good news is that the Core M/M
reading once again printed at 0.2%. The less good news is that the US Initial Claims spiked
higher, but Continuing Claims remained solid. We have already seen Claims
spiking higher in the past months, so it shouldn’t be worrying yet. The
long-term inflation expectations in the University of Michigan report
ticked lower, so on the data side the soft-landing narrative was supported. The
US Dollar, nonetheless, appreciated across the board as the attention may have
turned already on the next data given the higher energy prices and China starting to stimulate more.

On the other hand, the BoE
hiked by 25 bps as expected as the UK CPI missed expectations across the board and UK employment report showed a mixed picture with both
the unemployment rate and wage growth higher. The central bank seems to be
leaning more on the less hawkish side as a key line in the statement was
tweaked to indicate the propensity for a “higher for longer” stance rather than
keeping with additional rate hikes. Nevertheless, the market expects the BoE to
hike by 25 bps again in September and the data will show if that’s going to be
the case.

GBPUSD Technical Analysis –
Daily Timeframe

On the daily chart, we can see that GBPUSD has
bounced twice near the 1.2593 support where we
have also the 38.2% Fibonacci retracement level.
This may end up being a double bottom, but the
price will need to break above the neckline at 1.2820 to confirm it. For now,
the bias remains bearish as the pair broke below the trendline and the
price keeps printing lower lows and lower highs and the moving averages are
crossed to the downside.

GBPUSD Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see that we got a third
rejection from the downward trendline as the sellers stepped in with a defined
risk above to target a break below the support. The buyers, on the other hand,
are leaning on the support zone to target new highs. This consolidation is
bound to resolve on either side, so this is something to watch as a breakout
should lead to a sustained move.

GBPUSD Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see that we
have a swing high resistance at 1.2740 where we can also find the 61.8%
Fibonacci retracement level. That will be a key short-term resistance for the
sellers as a break above it and the trendline should give the buyers more
control and possibly lead to a break above the 1.2820 neckline.

Upcoming Events

This week is a
big one for the GBP as we have the Labour Market report today and the Inflation
report tomorrow. Better than expected data should make the market to expect
more hikes from the BoE, while worse than expected figures should support their
“higher for longer” stance. Today we will also see the latest US Retail Sales
report and a beat should support the USD even more, while a miss may pressure
it in the short term. Finally, we have the US Jobless Claims on Thursday and
after the miss in the prior week it will be interesting to see if the data
misses again.

This article was written by FL Contributors at Source