GBPUSD Technical Analysis - Traders await the US labour market data
Fundamental Overview
The USD recovered most of the losses triggered by Powell’s dovish tilt at the Jackson Hole Symposium before giving the gains back yesterday. Traders are now focused on the US labour market data due next week that will culminate with a crucial NFP report on Friday. In fact, the data will influence interest rates expectations greatly.
Right now, the market is pricing an 89% probability of a rate cut in September and a total of 55 bps of easing by year-end. Strong data might take the probability for a September cut towards a 50/50 chance but will certainly see a more hawkish repricing further down the curve and support the dollar. Soft data, on the other hand, will likely see traders increasing the dovish bets with a third cut by year-end being priced in and weighing on the greenback.
On the GBP side, the BoE delivered a hawkish cut at the last meeting and since then the data has been coming on the hotter side. In fact, the latest UK CPI surprised once again to the upside and last week’s Flash PMIs, although mixed, showed strength and persistent inflationary pressures.
Inflation should be the central bank’s biggest concern even if it takes labour market weakness to get back to 2%. Core inflation has never fallen below 3% since 2021. That’s a long time and might have influenced negatively inflation expectations, making a return to 2% even harder.
GBPUSD Technical Analysis – Daily Timeframe
GBPUSD Daily
On the daily chart, we can see that GBPUSD continues to trade between the 1.3590 resistance and the 1.3368 support. The price is now slowly rising back into the resistance and if it gets there, we can expect the sellers to step in with a defined risk above the resistance to position for a drop back into the support. The buyers, on the other hand, will want to see the price breaking higher to increase the bullish bets into the 1.3790 level next.
GBPUSD Technical Analysis – 4 hour Timeframe
GBPUSD 4 hour
On the 4 hour chart, we can see that we had a minor downward trendline defining the pullback after the rally triggered by Powell’s dovish tilt. The price broke higher yesterday and the buyers piled in to target a rally into the resistance. There’s not much else we can glean from this timeframe, so we need to zoom in to see some more details.
GBPUSD Technical Analysis – 1 hour Timeframe
GBPUSD 1 hour
On the 1 hour chart, we can see that the buyers stepped in around the most recent swing low at 1.3486. This should act as a minor support in case we get another pullback into it. The buyers will likely step in again there, while the sellers will look for a break lower to target the 1.3368 support. The red lines define the average daily range for today.
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Today we get the latest US Jobless Claims figures. Tomorrow, we conclude the week with the US PCE price index. This article was written by Giuseppe Dellamotta at investinglive.com.