Fundamental
Overview
The puzzling weakness in
the US Dollar following Trump’s victory looks more and more like it was just a
“sell the fact” reaction. The greenback is now back in the driving seat, and we
might also be seeing some pre-positioning into a potentially hot US CPI report
tomorrow.
At the latest Fed’s
decision, Fed Chair Powell said that they expect bumps on inflation and that
one or two bad data months on inflation won’t change the process. This keeps
the 25 bps cut in December in place even if we get higher inflation readings.
The market though is
forward-looking, and the rise in Treasury yields showed that the market sees
risks to the inflation outlook. Moreover, the red sweep could increase those
fears if the progress on inflation stalls, or worse, reverses.
On the GBP side, this
morning we got the UK
labour market report and although the data was mostly mixed, it leant more
on the dovish side. Overall though, it didn’t change anything for the market or
the BoE.
GBPUSD
Technical Analysis – Daily Timeframe
GBPUSD Daily
On the daily chart, we can
see that GBPUSD broke through the support
zone around the 1.2840 level and extended the drop as more sellers piled in.
The natural target should be the swing low at 1.2665 level. That’s where we can
expect the buyers to step in with a defined risk below the level to position
for a rally back into the 1.28 handle.
GBPUSD Technical
Analysis – 4 hour Timeframe
GBPUSD 4 hour
On the 4 hour chart, we can
see more clearly the break of the support which was defining the range between
the 1.2840 support and the 1.3040 resistance. If the price retests the support
now turned resistance, we can expect the sellers to step in with a defined risk
above the level to position for a drop into the 1.2665 level next. The buyers,
on the other hand, will want to see the price breaking higher to position for a
rally back into the 1.3040 resistance.
GBPUSD Technical
Analysis – 1 hour Timeframe
GBPUSD 1 hour
On the 1 hour chart, we can
see that we have a minor downward trendline defining the current bearish
momentum. The sellers will likely keep on leaning on it to position for new
lows, while the buyers will look for a break higher to pile in for a rally into
new highs. The red lines define the average daily range for today.
Upcoming
Catalysts
This week is a bit empty on the data front with the most important releases
scheduled for the latter part of the week. Tomorrow, we have the US CPI report.
On Thursday, we get the latest US Jobless Claims figures. On Friday, we
conclude the week with the US Retail Sales data.