Fundamental
Overview
On Wednesday, the Fed
finally started its easing cycle and decided to do it with a 50 bps
cut. The market was already leaning towards a 50 bps move, so it wasn’t a
surprise.
The larger cut was framed
as kind of an “insurance” cut with the dot plot showing two more 25 bps cuts by
the end of the year and less than the market expected in 2025.
The US Dollar didn’t get a
boost despite the rise in Treasury yields. Now that the decision is behind us,
the focus will be on the economic data.
If we start to see an
improvement, then Treasury yields will likely continue to rise and lead to a
reprising in the dovish expectations supporting the greenback in the
short-term.
Conversely, if the data
weakens, the market will likely go ahead with expecting more 50 bps cuts by
year-end and weighing on the US Dollar.
On the GBP side, the BoE
kept interest rates unchanged yesterday and sounded more hawkish than expected
with the markets now pricing just 39 bps of easing by year end.
GBPUSD
Technical Analysis – Daily Timeframe
GBPUSD Daily
On the daily chart, we can
see that GBPUSD managed to rally to a new high following the Fed’s and BoE’s
decisions. From a risk management perspective, the buyers would have a much
better risk to reward setup around the 1.30 handle. The sellers, on the other
hand, will likely wait for the price to fall below the previous high level at
1.3265 to start piling in for a correction lower.
GBPUSD Technical
Analysis – 4 hour Timeframe
GBPUSD 4 hour
On the 4 hour chart, we can
see that we have trendline
defining the current bullish momentum. If we get a pullback, the buyers will
likely lean on the trendline with a defined risk below it to position for the
continuation of the uptrend. The sellers, on the other hand, will want to see
the price breaking lower to increase the bearish bets into the 1.30 handle.
GBPUSD Technical Analysis – 1 hour Timeframe
GBPUSD 1 hour
On the 1 hour chart, there’s
not much else we can add but a move below the 1.3265 level will likely increase
the bearish momentum into the trendline as the sellers are likely to pile in. The
red lines define the average daily range for today.