GBPUSD Technical Analysis – Key support zone for the Bulls

The Fed hiked interest rates by 25 bps as expected and left everything. Fed
Chair Powell didn’t offer any hint on the next move and just reaffirmed their
data dependency, keeping all the options on the table. The economic data since
the FOMC meeting has been supporting the soft-landing narrative as the labour
market data remained strong while inflation data missed expectations.

Conversely, the UK CPI missed expectations across the board and
triggered a big repricing in interest rates expectations. In fact, the market
was pricing a higher chance of a 50 bps hike prior to the report given the
higher wages data in the previous UK employment report. Now, the market sees a higher
chance that the BoE hikes by 25 bps this week.

GBPUSD Technical Analysis –
Daily Timeframe

On the daily chart, we can see that GBPUSD has
broken below the 1.2847 support, where
we had also the confluence with the
red 21 moving average and
extended the selloff into the upward trendline and the
50% Fibonacci retracement level.
This is where we should start to see the buyers piling in with a defined risk
below the Fibonacci level to target a new high. The sellers, on the other hand,
will need the price to break below the Fibonacci level to extend the fall into
the 1.2593 support.

GBPUSD Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see that the price is
starting to diverge with the
MACD right
when it’s nearing the trendline. This is generally a sign of weakening momentum
often followed by pullbacks or reversals. In this case, we can notice that the
formation looks like a falling wedge pattern,
which increases the chances of getting at least a pullback into the 1.30

GBPUSD Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see that more
closely the falling wedge and how the price has been respecting the top
trendline of the pattern. If the price breaks above the top trendline, the
buyers are likely to pile in and target the 1.30 handle, which is also the top
of the pattern. On the other hand, if the price breaks below the strong support
zone at 1.2725, we can expect the sellers increase the bearish momentum and
lead to a selloff into the 1.2593 level.

Upcoming Events

Today the only notable
event will be the US ADP report. This is generally a less reliable labour
market indicator, but it can move the market. Tomorrow, the market will be
focused on the US Jobless Claims and the ISM Services PMI data. Finally, on
Friday, we conclude the week with the US NFP report. Strong data should support
the USD, while weak readings should weigh on the greenback.

This article was written by FL Contributors at Source