On the daily chart below, we can see that GBPUSD has recently fell back within the previous major range between the 1.1839 support and 1.2444 resistance. The moving averages have been reliable in indicating the trend and they are now pointing to the downside.
The obvious target for the sellers is of course the 1.1839 support and that looks attainable if we keep seeing resilience in US economic data that keeps core inflation higher for longer and forces the Fed to go much higher than its projected terminal rate. Notice also that the two tops diverged with the MACD and that strengthens the case for more downside to come.
GBPUSD Technical Analysis
On the 4 hour chart below, we can see that GBPUSD keeps printing clean lower lows and lower highs. The price has recently pulled back into a previous lower low resistance near the 1.24 handle and got rejected. This happened last Friday when the US PCE beat expectations sending stickier inflation fears and ultimately boosting the USD.
We can also see that GBPUSD on this timeframe has been diverging with the MACD, which generally indicates a weakening momentum that is often followed by pullbacks or reversals. Did we already get the pullback last Friday and this is the continuation of the trend?
On the 1 hour chart below, we can see that the price has been a bit “rangy” recently and that may be due to the fact the UK inflation surprised to the upside the last week and thus keeps the BoE on track for further rate hikes if the central bank doesn’t want inflation to spiral out again, or worse, getting entrenched at a high level.
If GBPUSD breaks the recent swing low at 1.2320, we should see some more downside to come, possibly extending to the 1.2272 level. If the price breaks above the trendline though, we should see a bigger pullback into the 1.2444 resistance. Recent US labour market data have been strong, so we may even see the market trading into the NFP report this week expecting a beat.