US:
- The Fed left interest rates unchanged as
expected at the last meeting. - The macroeconomic projections were revised higher
as the economy showed much stronger resilience than expected and the Dot Plot
showed that the majority of members still expects another rate hike by the end
of the year with less rate cuts in 2024. - Fed Chair Powell
reaffirmed their data dependency but added that they will proceed carefully. - The latest US Core PCE
came
in line with expectations with disinflation continuing steady. - The labour market remains
fairly solid as seen last week with another strong beat in Jobless Claims and the NFP report. - The ISM Manufacturing PMI beat
expectations while the ISM Services PMI came in
line with forecasts in another sign that the US economy remains resilient. - The US PPI data
yesterday surprised to the upside, but it was mainly energy driven and the
market brushed it aside. - The Fed members continue to cite elevated long-term
yields as a reason to proceed carefully and pause in November as well. - The market doesn’t expect the Fed to hike anymore.
UK:
- The BoE kept interest rates unchanged at the last meeting.
- The central bank is leaning more
towards keeping interest rates “higher for longer” but it kept a door open for
further tightening if inflationary pressures were to be more persistent. - Key economic data like the latest employment report showed a very high wage growth
despite the rising unemployment rate, but the latest UK CPI missed expectations across the board giving
the BoE a bit of relief. - The latest UK PMIs showed further contraction, especially in the
Services sector. - The market doesn’t expect the BoE to
hike anymore.
GBPUSD Technical Analysis –
Daily Timeframe
GBPUSD Daily
On the daily chart, we can see that the GBPUSD pair
is now at a key resistance area
where we have the confluence of the
previous swing level, the 38.2% Fibonacci retracement level
and the trendline. This is
where we can expect the sellers to step in with more conviction and a better
risk to reward setup to position for another selloff into new lows. The buyers,
on the other hand, will want to see the price breaking higher to invalidate the
bearish setup and turn the trend around.
GBPUSD Technical Analysis –
4 hour Timeframe
GBPUSD 4 hour
On the 4 hour chart, we can see that the divergence with the
MACD
signalled the loss of the bearish momentum and the subsequent bounce. The break
above the minor downward trendline gave the buyers even more conviction to
target the major trendline around the 1.2320 level. The trend on this timeframe
is clearly bullish as the price continues to print higher highs and higher lows
with the moving averages being
crossed to the upside. In case we start to see the price falling from the
current levels, the buyers are likely to lean on the counter-trendline around
the 1.2240 level to position for another rally and target the break above the
major trendline. The sellers, on the other hand, will want to see the price
breaking further below the counter-trendline to increase the bearish bets to
new lows.
GBPUSD Technical Analysis –
1 hour Timeframe
GBPUSD 1 hour
On the 1 hour chart, we can see that we
have another divergence with the MACD right into the resistance area. This is
generally a sign of weakening momentum often followed by pullbacks or
reversals. In this case, the divergence adds another layer of confluence for
the sellers and a break below the trendline around the 1.2290 level should give
the confirmation for an incoming selloff.
Upcoming Events
Today we will get the most important report of the
week, that is the US CPI report. The market is likely to focus on the core
measures and if the figures surprise to the upside the US Dollar is likely to
appreciate as the Fed might raise rates again in November and the 2024 rate
cuts could be repriced again. If the data surprises to the downside though, we
could see the US Dollar weakening as the market could bring rate cuts forward
and the fall in Treasury yields will weigh on the greenback.
At the same time, we will also
see the latest US Jobless Claims data which is an important labour market
report. The US Dollar is likely to appreciate both in case the data is much
stronger than expected due to a more hawkish pricing and much weaker than
expected figures as the risk sentiment might deteriorate due to recession
fears. Tomorrow, we conclude the week with the University of Michigan Consumer
Sentiment report.
