GBPUSD erased all the losses following the soft NFP report. What’s next?
Fundamental
Overview
The USD sold off across the
board on Friday following another soft NFP report. The dovish bets on the Fed
increased as a result and the market is now expecting three rate cuts by
year-end (70 bps). Moreover, we have also an 8% probability of a 50 bps cut in
September but that will likely happen only if we get a soft CPI report on
Thursday. In that case, the greenback will likely weaken further into the FOMC
meeting.
Overall, if one zooms out,
the US dollar continues to range although the dovish bets on the Fed keep
weighing on the currency. Part of that could be the fact that the bearish
positioning on the dollar could be overstretched and we might be at the peak of
the dovish pricing. In fact, if the Fed cuts trigger stronger economic activity
in the next months, the rate cuts in 2026 could be priced out and support the
dollar. Nevertheless, the trend is still skewed to the downside, and we might
need strong data to reverse it.
On the GBP side, nothing
has changed fundamentally. 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 the latest Flash PMIs, although
mixed, showed strength and persistent inflationary pressures.
Last week, we got a selloff
in the pound across the board as the UK 30yr yield jumped to a new cycle high.
That was eventually erased in the following days and especially after the soft
NFP report.
GBPUSD
Technical Analysis – Daily Timeframe
GBPUSD Daily
On the daily chart, we can
see that GBPUSD sold off all the way back to the key 1.3368 support after the UK 30yr yields
jumped to a new cycle high but eventually bounced off of the support. The price
is now back near the 1.3590 resistance. If the price gets there, the sellers
will likely step in with a defined risk above the resistance to position for a
drop back into the 1.3368 support. The buyers, on the other hand, will look for
a break 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 have an upward trendline
defining the bullish momentum. The buyers will likely continue to lean on the
trendline with a defined risk below it to keep pushing into new highs. The
sellers, on the other hand, will look for a break lower to position for a drop
into the 1.3368 support next.
GBPUSD Technical
Analysis – 1 hour Timeframe
GBPUSD 1 hour
On the 1 hour chart, there’s
not much else we can add here as the buyers will look for a bounce around the
trendline, while the sellers will look for a break. The red lines define the average daily range for today.
Upcoming Catalysts
On Wednesday we get the US PPI report. On Thursday, we get the US
CPI report and the latest US Jobless Claims figures. On Friday, we conclude the
week with the UK GDP and the University of Michigan Consumer Sentiment report.
