On the daily chart below for GBPUSD,
we can see that the last two tries from the buyers of breaking above the top of
the range and sustain a bullish trend failed. The first one failed due to bad
top tier US economic data that scared the market and turned the sentiment into
risk-off.
The price then rallied as the US
NFP
surprised again expectations with strong jobs numbers and lower wage pressures.
Last Friday though the US
retail sales missed expectations across the board sending the
price lower again as the USD is favoured in times of recessions.
The move lower was also boosted
later as the 1
year inflation expectations in the University of Michigan survey showed a big
jump to the upside making the market to price out some of the rate cuts
previously factored in. The price is now finding support at the red long period
moving average and this will be something to watch if the price
then breaks below it.
On the 4 hour chart below, we can
see that the whole move from the 1.20 handle was diverging with the MACD trading into the top of the
range. This is generally a sign of a weakening momentum and generally we can
see pullbacks or reversals. In this case, we got many pullbacks as the price
traded in a channel-like fashion.
The latest move lower broke below
the lower bound of the channel and this may be a bad omen for the buyers. In
case the sellers take control, we may see a big bearish move to the bottom of
the channel at 1.20. The buyers will want the price to break above the top of
the range again to get the conviction to keep charging higher.
On the 1 hour chart below, we can
see that short-term bearish move is bouncing near the previous swing level.
This morning the UK
Employment report showed that wage inflation is still high and it
should force the BoE to keep hiking interest rates. In fact, the GBP got a
boost from the data, and it’s now expected to rally towards the zone between
the 38.2% Fibonacci
retracement level and the top of the range at 1.2444.
The sellers are likely to lean on
that zone to try some shorts, but the best signal for them would be a break
below the swing level at 1.2344, because that would confirm the big bearish
setup and should lead to a move towards the 1.20 handle.