The most recent NFP report, released last Friday, once again
outperformed expectations, extending its impressive winning streak to 14. However,
upon closer analysis, the report revealed some less favourable details. The
unemployment rate experienced a significant increase from 3.4% to 3.7%, marking
the largest month-over-month jump since the pandemic began. Additionally, there
was a slight decline in the average workweek hours, which could indicate
potential layoffs being considered by employers. Overall, the report provided a
mix of information that could be interpreted differently by individuals.
Shifting focus to the US ISM Services PMI, it came in considerably lower than
anticipated at 50.3, narrowly missing the threshold for contractionary
territory. The employment sub-index indicated a contraction, while the prices
paid sub-index saw a substantial decrease, returning to levels last observed in
May 2020. As a result, the market responded by further reducing the likelihood
of additional interest rate hikes by the Federal Reserve (Fed).
Furthermore, the recent
surprising rate hikes by the RBA and the BoC may have influenced risk
sentiment, leading to concerns that the Fed might follow suit. However, it is
unlikely given that the Fed typically aligns its actions with market pricing,
and we should also take into account that the CPI report has not yet been
released.
GBPUSD Technical Analysis –
Daily Timeframe
GBPUSD Daily
On the daily chart, the GBPUSD is trading again
within the range between the 1.2340 support and
1.2530 resistance. Just a week ago it looked like the pair was topping out as
we also had the Head and Shoulders pattern
as an extra bearish signal, but now that the moving averages are on
the verge of another crossover to the upside, the bias is murkier. Maybe this
was just a bigger and more complex pullback.
GBPUSD Technical Analysis –
4 hour Timeframe
GBPUSD 4 hour
On the 4 hour chart, the levels to watch are of
course the resistance and support of the range. Given the uncertainty in the
markets, it may be better to wait for a breakout supported by a fundamental
catalyst. The buyers, should pile in if the price breaks above the 1.2550
level, while the sellers should jump onboard in case the price breaks below the
1.2300 handle.
GBPUSD Technical Analysis –
1 hour Timeframe
GBPUSD 1 hour
On the 1 hour chart, we can see the short
term price action within the range and we can notice that there isn’t much to
glean from this chart as support and resistance levels are confusing as they
generally are in rangebound markets. There’s just a possible trendline where
the price may bounce off of or break through and give the buyers and sellers an
extra opportunity to enter in line with their biases before the actual range
breakouts.
The US
Jobless Claims report is worth monitoring today in terms of potential risks,
although its impact on the market is not anticipated to be substantial unless
there are significant deviations from the expected number:
- If the report exceeds expectations by a significant margin, it could spark some hawkish expectations in the market. This could suggest that inflation may remain elevated due to a tight labour market, potentially influencing the market’s outlook.
- Conversely, if the report falls short of expectations by a significant margin, it should reaffirm the Federal Reserve’s neutral stance. Unless accompanied by a high Consumer Price Index (CPI), the market might even factor in the end of the interest rate hiking cycle.