Fundamental Overview

The USD came back with a vengeance last Friday following the strong US NFP report where the data surprised with solid job and wage growth. There were also negatives like the uptick in the unemployment rate, but all in all, we can say that it was a good report.

The data triggered a hawkish repricing in interest rates expectations with the market now expecting once again just one cut by the end of the year. It’s not a big deal in the bigger picture, but for now the sentiment is bullish for the greenback and we will likely need a catalyst to change it again.

The GBP, on the other hand, has been supported by the risk-on sentiment and general US Dollar weakness before the NFP report. Today, we got another disappointing UK labour market report where we saw the unemployment rate increasing further, job losses and wage growth remaining sticky at elevated levels.

The data didn’t change much markets expectations as the first cut is still seen in November with a total of 35 bps of easing expected by the end of the year compared to 30 bps before the jobs data. The Bank of England is more focused on the inflation data, so that’s what will influence the market pricing the most. Nevertheless, if we go back into risk-on sentiment, the greenback could start to lose ground against the Pound again.

GBPUSD Technical Analysis – Daily Timeframe

GBPUSD Technical Analysis

On the daily chart, we can see that GBPUSD couldn’t break above the 1.28 handle and eventually dropped back into the 1.27 handle following the US NFP release. We can see that the 1.27 handle is a strong support as we can also find the trendline for confluence.

This is where we can expect the buyers to step in with a defined risk below the trendline to position for a rally into the 1.29 handle. The sellers, on the other hand, will want to see the price breaking lower to start looking for new lows with the 1.26 handle as the first target.

GBPUSD Technical Analysis – 4 hour Timeframe

GBPUSD Technical Analysis
GBPUSD 4 hour

On the 4 hour chart, we can see that we have the 50% Fibonacci retracement level around the 1.2634 level which is going to be the first target for the sellers in case the price breaks below the 1.27 support zone.

That’s also where we can expect the buyers coming back buying the dip and position for new highs with a better risk to reward setup. A lot will be decided by the US CPI report tomorrow where hot data should strengthen the US Dollar further while soft figures should see the greenback getting sold across the board.

GBPUSD Technical Analysis – 1 hour Timeframe

GBPUSD Technical Analysis
GBPUSD 1 hour

On the 1 hour chart, we can see that we have a good resistance at the 1.2740 level where we can find the confluence of the 38.2% Fibonacci retracement level. The sellers leant on this zone and positioned for a continuation of the downtrend looking for a break below the trendline.

The buyers will want to see the price breaking above the resistance to gain even more conviction and increase the bullish bets into the 1.29 handle. The red lines define the average daily range for today.

Upcoming Catalysts

This week is a bit empty on the data front although we will have the biggest market moving events tomorrow when we get the US CPI data and the FOMC rate decision. On Thursday, we have the US PPI and the latest US Jobless Claims figures. On Friday, we conclude the week with the University of Michigan Consumer Sentiment survey.

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