On the daily chart below, we can
see that GBPUSD has recently fell back within the previous major range between
the 1.1839 support and 1.2444 resistance. The moving
averages have been reliable in indicating the trend and they are now pointing to
the downside.
The obvious target for the
sellers is of course the 1.1839 support and that looks attainable if we keep
seeing resilience in US economic data that keeps core inflation higher for
longer and forces the Fed to go much higher than its projected terminal rate.
Notice also that the two tops diverged with the MACD and that strengthens the case
for more downside to come.
On the 4 hour chart below, we can
see that GBPUSD keeps printing clean lower lows and lower highs. The price has
recently pulled back into a previous lower low resistance near the 1.24 handle
and got rejected. This happened last Friday when the US
PCE beat
expectations sending stickier inflation fears and ultimately boosting the USD.
We can also see that GBPUSD on
this timeframe has been diverging with the MACD, which generally indicates a
weakening momentum that is often followed by pullbacks or reversals. Did we
already get the pullback last Friday and this is the continuation of the trend?
On the 1 hour chart below, we can
see that the price has been a bit “rangy” recently and that may be due to the
fact the UK
inflation surprised to the upside the last week and thus keeps the BoE on track
for further rate hikes if the central bank doesn’t want inflation to spiral out
again, or worse, getting entrenched at a high level.
If GBPUSD breaks the recent swing
low at 1.2320, we should see some more downside to come, possibly extending to
the 1.2272 level. If the price breaks above the trendline though, we should see a bigger
pullback into the 1.2444 resistance. Recent US labour market data have been strong,
so we may even see the market trading into the NFP report this week expecting a
beat.