Fundamental
Overview
The USD sold off across the
board on Friday following a softer than expected NFP report. Overall, the data wasn’t as bad as one
might think by just looking at the reaction but given that we were
positioned for a strong report and the pricing got more hawkish after the
Fed’s decision, the weaker data was enough to trigger a quick repricing.
In fact, the market at some
point was pricing 60 bps of easing by year-end compared to just 35 bps before
the NFP release. That’s a pretty quick change of heart. Over the weekend, we
also got Fed’s Williams opening the door for a cut in
September and Fed’s Daly on Monday echoed the same sentiment. The NFP clearly made them a bit
more worried, and a September cut seems now a done deal.
It’s highly likely that more
benign data will see Fed Chair Powell opening the door for a cut in September
at the Jackson Hole Symposium. Nonetheless, the ISM Services PMI yesterday showed a new high in the
prices index which could keep traders on edge heading into the US CPI next
week. Tomorrow, we get the US Jobless Claims and good data might trigger a
rethink on the actual softness of the labour market.
On the GBP side, the BoE
tomorrow is expected to cut interest rates by 25 bps which would be in line
with the central bank’s strategy of cutting at a quarterly pace. The UK
data has been mixed with inflation surprising to the upside, while the employment
report disappointing. The BoE is likely to reaffirm its gradual and careful
approach and remain data-dependent. The market is expecting another rate
cut by the end of the year.
GBPUSD
Technical Analysis – Daily Timeframe
On the daily chart, we can
see that GBPUSD bounced from a key swing level at 1.3140. The price is now
close to the key resistance
around the 1.3368 level. That’s where we can expect the sellers to step in with
a defined risk above the resistance to position for a drop back into the 1.3140
level. The buyers, on the other hand, will look for a break higher to increase the
bullish bets into new highs.
GBPUSD Technical
Analysis – 4 hour Timeframe
On the 4 hour chart, there’s
not much we can glean from this timeframe as the price is just consolidating,
and we don’t have any key level where to lean onto. We need to zoom in to see
some more details.
GBPUSD Technical
Analysis – 1 hour Timeframe
On the 1 hour chart, we can
see that we have a minor resistance zone around the 1.3310 level where the
price got rejected from several times in the past days. The sellers will likely
continue to lean on the resistance to keep pushing into new lows, while the
buyers will look for a break higher to extend the rally into the 1.3368
resistance next. The red lines define the average daily range for today.
Upcoming Catalysts
Tomorrow we have the BoE rate decision and
the US Jobless Claims.
This article was written by Giuseppe Dellamotta at investinglive.com.