USD

• The Fed left interest rates unchanged as
  expected at the last meeting with basically no change to the statement.
• Fed Chair Powell stressed
  once again that they are proceeding carefully as the full effects of policy
  tightening have yet to be felt.
• The recent US CPI missed
  expectations across the board bringing the expectations for rate cuts
  forward.
• The labour market is
  starting to show weakness as Continuing Claims are now
  rising at a fast pace and the recent NFP report
  missed across the board. Last week though, the US Jobless Claims beat
  forecasts by a big margin, although volatility in the data is normal.
• The latest US PMIs came
  basically in line with expectations with a miss in the Manufacturing index and
  a beat in the Services measure.
• The recent Fedspeak has been leaning on
  the hawkish side, but the recent data suggest that the Fed is likely done for
  the cycle.
• The market doesn’t
  expect the Fed to hike anymore.

GBP

• The BoE kept interest rates unchanged as expected at the last meeting.
• The central bank is leaning towards
  keeping interest rates “higher for longer”, although it keeps a door open for
  further tightening if inflationary pressures were to be more persistent.
• The BoE members continue to repeat
  that they will keep rates high for long enough to get inflation back to target.
• The latest employment report beat expectations with wage growth
  remaining at elevated levels.
• The UK CPI missed expectations across the board, which was
  a welcome development for the BoE.
• The UK PMIs last week beat expectations on both the
  Manufacturing and Services measures, with the Services sector crawling back in
  expansion.
• The latest UK Retail Sales missed expectations across the
  board by a big margin as consumer spending remains weak.
• The market doesn’t expect the BoE to
  hike anymore.

GBPUSD Technical Analysis –
Daily Timeframe

On the daily chart, we can see that GBPUSD breached
the key resistance around
the 1.26 handle where we had also the 50% Fibonacci retracement level
for confluence. The
price looks a bit overstretched though as depicted by the distance from the
blue 8 moving average. In such
instances, we can generally see a pullback into the moving average or some
consolidation before the next move.

GBPUSD Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see that the pair has
been diverging with the
MACD for
quite some time now. This is generally a sign of weakening momentum often
followed by pullbacks or reversals. Given that we are around the key resistance
that should be a call for caution. From a risk management perspective, the
buyers would have a much better risk to reward setup around the trendline where we
can also find the 61.8% Fibonacci retracement level for confluence.

GBPUSD Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see that we
have another divergence with the MACD right above the key resistance. We might
end up with a classic “break and retest” pattern with the buyers leaning on the
resistance turned
support with a defined risk below the trendline. The sellers,
on the other hand, will want to see the price breaking below the trendline to
invalidate the bullish setup and position for a drop into the major trendline
around the 1.24 handle.

Upcoming Events

Today, we will get the latest US Consumer Confidence
report and it will be interesting to see how the US consumers see the labour
market. On Thursday, we will see the US PCE and US Jobless Claims data with the
market likely focusing more on the latter given that we already saw the latest
inflation data with the US CPI report just two weeks ago. Finally, on Friday,
we conclude the week with the US ISM Manufacturing PMI which missed
expectations by a big margin the last time.

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