Fundamental
Overview
Last Thursday, WSJ’s
Timiraos published an article which seemed suggesting that a 50 bps cut was
still being discussed. The market responded by raising 50 bps cut probabilities
to around 40% from 13% before the news.
Nick Timiraos is considered
a Fed “insider”, so the market is attentive to all of his pieces concerning
potential Fed decisions. Since then, the 50 bps camp got more vocal and the
probability for the Fed to cut by 50 bps at the upcoming meeting stands now
around 70% with a total of 120 bps of easing by year-end.
This repricing weakened the
US Dollar across the board as Treasury yields fell further. Once we are done
with the Fed decision though, the focus will switch back to the economic data.
In case we start to see better figures, the market might start to pare back the
aggressive easing expected in 2025 supporting the greenback in the short-term.
For the BoE, the market
sees a 60% probability of no change at this week’s meeting and a total of 56
bps of easing by year-end. Tomorrow we get the UK CPI report and if the data
surprises to the downside, the market will likely see a rate cut on Thursday as
the highest probability.
GBPUSD
Technical Analysis – Daily Timeframe
GBPUSD Daily
On the daily chart, we can
see that GBPUSD bounced from the key 1.3050 support where we had also the 38.2% Fibonacci retracement level for confluence and extended the rally above the
1.32 handle. If the price manages to break into new highs, there’s not much
resistance until the 1.35 handle.
GBPUSD Technical
Analysis – 4 hour Timeframe
GBPUSD 4 hour
On the 4 hour chart, we can
see that we have a key swing level around 1.3238 which is where we got the
reaction to the US NFP report and the following appreciation in the greenback. This
is where we can expect the sellers to step in with a defined risk above the
level to position for a drop back into the 1.3050 support. The buyers, on the
other hand, will want to see the price breaking higher to increase the bullish
bets into new highs.
GBPUSD Technical
Analysis – 1 hour Timeframe
GBPUSD 1 hour
On the 1 hour chart, we can
see that we have an upward trendline defining the current bullish momentum. The
buyers will likely keep on leaning on the trendline to position for further
upside. The sellers, on the other hand, will want to see the price breaking
lower to pile in for a drop into the 1.3050 support. The red lines define the average daily range for today.
Upcoming
Catalysts
Today we get the US Retail Sales and the US Industrial Production data.
Tomorrow, we have the UK CPI report and the FOMC Rate Decision. On Thursday, we
have the BoE Rate Decision and the latest US Jobless Claims figures. On Friday,
we conclude with the UK Retail Sales data.