USD
- The Fed left interest rates unchanged as expected at the last meeting with basically no change to the statement. The Dot Plot still showed three rate cuts for 2024 and the economic projections were upgraded with growth and inflation higher and the unemployment rate lower.
- The US CPI beat expectations for the third consecutive month, while the US PPI came in line with forecasts.
- The US NFP beat expectations across the board although the average hourly earnings came in line with forecasts.
- The US ISM Manufacturing PMI beat expectations by a big margin with the prices component continuing to increase, while the US ISM Services PMI missed with the price index dropping to the lowest level in 4 years.
- The US Retail Sales beat expectations across the board by a big margin with positive revisions to the prior figures.
- The market now expects the first rate cut in September.
GBP
- The BoE left interest rates unchanged as expected but with Haskel and Mann this time voting for a hold instead of a hike.
- The employment report missed expectations with an uptick in the unemployment rate and an easing in wage growth.
- The UK CPI missed expectations across the board but with Services inflation remaining sticky, which continues to support the BoE’s patient stance.
- The latest UK PMIs showed the Services PMI missing expectations slightly and the Manufacturing PMI beating.
- The market sees a 50/50 chance of a rate cut in June.
GBPUSD Technical Analysis – Daily Timeframe
On the daily chart, we can see that GBPUSD finally broke out of the 4-month range and extended the drop into the 1.24 handle before finding some support. From a risk management perspective, the sellers will have a much better risk to reward setup around the trendline where they will also find the confluence with the red 21 moving average and the 61.8% Fibonacci retracement level. Alternatively, they might also lean on the support turned resistance around the 1.2510 level where they will find the confluence of the blue 8 moving average and the 38.2% Fibonacci retracement level.
GBPUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we got a fakeout above the trendline last week and then the huge selloff following the US CPI release. We can also see that we have a minor trendline defining the current downward momentum. The sellers might lean on this trendline with a defined risk above it to position for further downside although the risk to reward wouldn’t be optimal. The buyers, on the other hand, will want to see the price breaking higher to position for a rally into the major trendline and eventually target a break above it.
GBPUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the price has been diverging with the MACD, which is generally a sign of weakening momentum often followed by pullbacks or reversals. In this case, the target for the pullback should be the minor trendline while a break to the upside would confirm a reversal and trigger a rally into the base of the divergent formation around the 1.2570 level.
Upcoming Events
Today we will see the UK jobs data. Tomorrow, we have the UK CPI report. On Thursday, we get the latest US Jobless Claims figures, while on Friday we conclude the week with the UK Retail Sales.
