Fundamental
Overview
The USD is weaker across
the board following the soft US PPI report yesterday. The market pricing is now
showing a total of 31 bps of easing by year end compared to 24 bps before the
PPI. The focus remains on the US CPI report today.
A hot report will likely
cause some trouble in the markets with the stock market looking as the most
vulnerable right now.The best outcome would be a soft
report given the overstretched moves in the markets caused by the repricing in
rate cuts expectations.
That would likely reverse
most of the recent trends and trigger a correction in Treasury yields and
therefore in the US Dollar.
On the GBP side, the UK CPI report today missed expectations across the
board by a big margin and strengthened the markets expectations for a 25 bps
cut at the upcoming BoE meeting.
As a reminder, the BoE kept the Bank Rate unchanged as expected at
the last policy decision but we got a more dovish than expected vote split as 3
voters wanted a rate cut compared to just 1 expected.
GBPUSD
Technical Analysis – Daily Timeframe
On the daily chart, we can
see that GBPUSD is consolidating around the low ahead of the US CPI report. From
a risk management perspective, the sellers will have a better risk to reward
setup around the major trendline to position for further downside.
The buyers, on the other hand, will want to see the price breaking higher to
increase the bullish bets into new highs.
GBPUSD Technical
Analysis – 4 hour Timeframe
On the 4 hour chart, we can
see that the price broke above the minor downward trendline that was defining
the bearish momentum on this timeframe. This is generally a signal for a bigger
pullback. The buyers will likely pile in around these levels to position for a
pullback into the major trendline. The sellers, on the other hand, will look
for breakouts on lower timeframes to keep pushing towards new lows.
GBPUSD Technical
Analysis – 1 hour Timeframe
On the 1 hour chart, we can
see that we have an important resistance zone around the 1.2250 level where
the price got rejected from several times in the past days. This is where we
can expect the sellers to step in with a defined risk above the level to
position for a drop into new lows.
The buyers, on the other
hand, will want to see the price breaking higher to increase the bullish bets
into the major trendline. The red lines define the average daily range for today although the price can
easily extend beyond those levels given that we have the US CPI report ahead
and it’s a key event.
Upcoming
Catalysts
Today, we have the US CPI report, while tomorrow we get the latest US Jobless
Claims figures.
This article was written by Giuseppe Dellamotta at www.forexlive.com.
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