GBPUSD Fundamental Analysis

US

• The Fed left interest rates unchanged as
  expected at the last meeting.
• The macroeconomic projections were revised higher,
  and the Dot Plot showed that the FOMC still expects another rate hike by the
  end of the year with less rate cuts projected in 2024.
• Fed Chair Powell
  reaffirmed their data dependency but added that they will proceed carefully.
• The US Core PCE last
  week came in line with expectations, so the market’s pricing barely changed.
• The labour market remains
  pretty resilient but we are starting to see some weakness as Continuing Claims missed
  expectations once again last week pointing to an upward trend.
• The US Retail Sales
  recently beat expectations by a big margin with positive revisions to the prior
  figures, suggesting the consumers’ spending remains solid.
• The recent US PMIs showed
  that the economy now looks more balanced.
• Fed Chair Powelland other FOMC members continue
  to highlight
  the rise in long term yields as doing the job for the Fed and therefore they
  are expected to keep rates steady this week.
• The market doesn’t expect the Fed to hike anymore.

UK

• The BoE kept interest rates unchanged at the last meeting.
• The central bank is leaning towards
  keeping interest rates “higher for longer”, although it kept a door open for
  further tightening if inflationary pressures were to be more persistent.
• The latest employment report showed a slowdown in wage growth
  and some job losses in September which could point to a softening labour
  market.
• The recent UK CPI slightly beat expectations but given the
  softening in the labour market it’s unlikely to change the BoE’s stance.
• The UK PMIs showed further contraction in the services
  sector, which accounts for 80% of UK’s economic activity.
• The market doesn’t expect the BoE to
  hike anymore.

GBPUSD Technical Analysis –
Daily Timeframe

On the daily chart, we can see that the GBPUSD pair
continues to hover around the downward trendline
maintaining a bearish bias with the 1.1840 level as the target. The sellers are
likely to keep leaning on the trendline to position for further downside. The
buyers, on the other hand, will need the price to break above the trendline to
change the bias from bearish to bullish and start targeting new highs.

GBPUSD Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see that the pair is
forming what looks like a descending triangle. The
price action inside the pattern is generally messy and erratic, and it’s
usually better to wait for a breakout or leaning on the boundaries of the
triangle instead of taking trades within it.

GBPUSD Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see that from
a risk management perspective, the sellers would be better off selling from the
trendline with a defined risk above it and target a break below the 1.2050 support. If
the price breaks to the upside, the sellers can fold quickly as the buyers will
start to pile in more aggressively and target the 1.23 resistance. Conversely,
the buyers would be better off waiting for the price to fall into the 1.2050
support before positioning for a rally into the highs and target a breakout of
the triangle.

Upcoming Events

This week, we will get lots of tier one data points with
the US labour market and the FOMC decision in focus. Today, we have the US
Employment Cost Index and the Consumer Confidence report. Tomorrow, it will be
the time for the US ADP, the ISM Manufacturing PMI, the Job Openings data and
the FOMC rate decision. On Thursday we will have the BoE rate decision and the
US Jobless Claims data, while on Friday we conclude the week with the US NFP
report and the ISM Services PMI.

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