US:

• The Fed hiked by 25 bps as
  expected and kept everything unchanged at the last meeting.
• Fed Chair Powell reaffirmed their data dependency
  and kept all the options on the table.
• The US CPI last
  week came in line with expectations, so the market’s pricing remained roughly
  the same.
• The labour market
  displayed signs of softening although it remains fairly solid.
• The other important economic data like the ISM
  Services PMI, Jobless Claims and Retail Sales all beat expectations recently.
• The Fed members are leaning towards a pause in
  September and the next decision will still be dictated by the economic data.
• The market doesn’t expect the Fed to hike at the
  September meeting, but there’s now basically a 50/50 chance of a hike in
  November.

UK:

• The BoE hiked by 25 bps as expected at the last
  meeting.
• The central bank seems to be leaning
  more on the less hawkish side as a key line in the statement was tweaked to
  indicate the propensity for a “higher for longer” stance rather than keeping
  with additional rate hikes.
• Key economic data like the latest employment report showed a very high wage growth
  despite the rising unemployment rate, and the UK CPI beat expectations the last month pointing to a
  stagflation.
• The UK PMIs recently missed expectations across the board
  with the Services sector plunging into contraction.
• The market expects the BoE to hike
  by 25 bps this week and then remaining on hold for an extended period of time.

GBPUSD Technical Analysis –
Daily Timeframe

On the daily chart, we can see that GBPUSD remains
in a clear downtrend with the price printing lower lows and lower highs and moving averages being
crossed to the downside. The pair is now a bit overstretched, so we might see a
pullback soon, although a final selloff before the pullback into the 1.23
handle cannot be ruled out. From a risk management perspective, the sellers
will have another good opportunity around the downward trendline where
there will also be the confluence with the
red 21 moving average. The buyers, on the other hand, will need the price to
break above the 1.26 handle to change the overall trend.

GBPUSD Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see that the price is diverging with the
MACD which is
generally a sign of weakening momentum often followed by pullbacks or
reversals. In this case, we might see a pullback into the minor downward
trendline and the support-turned-resistance around
the 1.2440 level before another leg lower. If the price breaks above the
trendline, we can expect the buyers to pile in and extend the rally into the
1.2540 resistance. That’s
where we will likely see the sellers piling in with more conviction and a
better risk to reward setup.

GBPUSD Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see that we
have another divergence with the MACD which might be another confirmation that
a pullback into the 1.2440 level is indeed in the cards. We can also see that
we have a 38.2% Fibonacci
retracement level right around the 1.2440 resistance
for further confluence.

Upcoming Events

This week has just a few important economic releases with
the FOMC and the BoE rate decisions being the highlight. Tomorrow, we will see
the latest UK CPI data, which is expected to impact the pound a lot as it will
influence market’s expectation for the next BoE rate path. Later in the day, we
will have the FOMC policy decision where the Fed is expected to keep rates
unchanged with the market focusing more on the Dot Plot and Fed Chair Powell’s
press conference. On Thursday, the BoE is expected to hike by 25 bps with the
market focusing more on the forward guidance while later that day we will also
see the US Jobless Claims report. Finally, we conclude the week with the UK and
US PMIs data on Friday.

See also the video below

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