US:
- The Fed hiked by 25 bps as expected and kept everything unchanged at the last meeting.
- Fed Chair Powell reaffirmed their data dependency and kept all the options on the table.
- Inflation measures since then showed further disinflation.
- The labour market displayed signs of softening although it remains fairly solid.
- Overall, the economic data started to surprise to the downside lately.
- This week the ISM Services PMI and Jobless Claims surprised to the upside.
- The Fed members are leaning more towards a pause in September rather than another rate hike.
- ·The market doesn’t expect the Fed to hike at the September meeting, but there’s now a 50/50 chance of a hike in November.
UK:
- The BoE hiked by 25 bps as expected at the last meeting.
- 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.
- Recent key economic data like the latest employment report showed even more wage growth despite the unemployment rate ticking higher again, and the UK CPI beat expectations pointing to stagflation.
- The UK PMIs recently missed expectations across the board with the Services sector plunging into contraction.
- The market expects the BoE to hike by 25 bps at the upcoming meeting.
GBPUSD Technical Analysis – Daily Timeframe
On the daily chart, we can see that GBPUSD eventually broke out of the key support around the 1.2593 level and extended the selloff into the 1.2450 level. This breakout opened the door for a fall into the 1.2310 level, although we might see first a pullback given that the price is a bit overstretched as depicted by the distance from the blue 8 moving average. In such instances, we can generally see a pullback into the moving average or some consolidation before the next move.
GBPUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the support zone has turned into resistance now and we have also the confluence with the Fibonacci retracement levels, the trendline and the daily red 21 moving average. This is where the sellers are likely to pile in again with a defined risk above the trendline to target the 1.2310 level. The buyers, on the other hand, will need the price to break above the trendline to invalidate the bearish setup and start targeting new higher highs.
GBPUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that at the moment the price is testing a minor trendline where we have also the confluence of the previous swing high level and the 38.2% Fibonacci retracement level. More aggressive sellers may want to enter already here with a defined risk above the level to target the 1.2310 support. The buyers, on the other hand, will want to see the price breaking higher to pile in and extend the correction into the 1.26 handle.
