GBPUSD Technical Analysis - Bulls and Bears are Watching a Key Level

[Forex News]

Last week the US CPI report missed across the board and led to astrong rally in GBPUSD as the market priced out the more hawkish path for theFed and now expects the July hike to be the last one. The resilient labourmarket, the rising consumer sentiment and the better than expected Retail Sales, have also increased the chances ofgetting a soft landing which contributed to the positive risk sentiment and theUSD weakness.

Conversely, the UK CPI this week missed expectations across the boardand triggered a big repricing in interest rates expectations. In fact, themarket was pricing a higher chance of a 50 bps hike prior to the report giventhe higher wages data in the previous UK employment report. Now, the market sees a higherchance that the BoE hikes by 25 bps at the upcoming meeting.

GBPUSD Technical Analysis –Daily Timeframe

On the daily chart, we can see that GBPUSD had amassive run to the upside since bottoming out on the red 21 moving average. Afterthe quick rally following the miss in the US CPI report, the price started topull back as the stronger US Retail Sales gave the USD some support. The priceis now close to a key support zonewhere we can find the previous swing high level, the 50% Fibonacci retracement leveland the red 21 moving average for confluence. Thebuyers are likely to step in here with a defined risk below the level andtarget a new high.

GBPUSD Technical Analysis –4 hour Timeframe

On the 4 hour chart, we can see more closely thekey support zone near the 1.2847 level. The price will need to bounce here togive the buyers the conviction to target new highs as a break lower wouldtrigger a selloff into the 1.2680 level where we can also find the trendline. Thatwould also be the first target for the sellers if the price breaks below the1.2847 level.

GBPUSD Technical Analysis –1 hour Timeframe

On the 1 hour chart, we can see that theselloff following the miss in the UK CPI report bottomed out on the 50%Fibonacci retracement level and the price has even broke above the downwardtrendline. This might be a sign that the bearish momentum has weakened, and thebuyers may have the upper hand. The price will need to create a new higher highbreaking above the swing high at 1.2962 to confirm the change in trend and seemore buyers piling in.

Upcoming Events

Today the market willfocus on the US Jobless Claims report as the labour market data continues to beat the top of the market’s attention. A small miss or beat shouldn’t be marketmoving as the market is more likely to move on big deviations given thevolatility of the report. In fact, a big beat should give the USD some support,while a big miss should pressure it even more as the market would bring forwardthe rate cuts expectations.

This article was written by FL Contributors at www.forexlive.com.

More...