Increased Bullish Bias Observed in GBPUSD Technical Analysis

US

• The Fed left interest rates unchanged as expected with basically no change to the statement.
• Fed Chair Powell stressed once again that they are proceeding carefully as the full effects of policy tightening have yet to be felt.
• The recent US Core PCE came in line with expectations.
• The labour market is starting to show some weakness as Continuing Claims are now rising at a fast pace and the NFP data last Friday missed across the board.
• The US Consumer Confidence fell for the third consecutive month although the data beat expectations.
• The US ISM Manufacturing PMI last week missed expectations by a big margin, followed later on Friday with a disappointing ISM Services PMI, although the index remained in expansion.
• The market doesn’t expect the Fed to hike anymore.

UK

• The BoE kept interest rates unchanged as expected last week.
• The central bank is leaning towards keeping interest rates “higher for longer”, although it keeps a door open for further tightening if inflationary pressures were to be more persistent.
• BoE Governor Bailey repeated that they will keep rates high for long enough to get inflation back to target.
• The latest employment report showed a slowdown in wage growth and some job losses in September which are pointing to a softening labour market.
• The recent UK CPI slightly beat expectations but given the softening in the labour market it’s unlikely to change the BoE’s stance.
• The UK PMIs showed further contraction in the services sector, which accounts for 80% of UK’s economic activity.
• The market doesn’t expect the BoE to hike anymore.

GBPUSD Technical Analysis – Daily Timeframe

On the daily chart, we can see that the GBPUSD pair broke out of the key trendline and the resistance around the 1.23 handle. The bias has now turned more bullish. The recent strong rally made the price to overstretch though as depicted by the distance from the blue 8 moving average. In such instances, we can generally see a pullback into the moving average or some consolidation before a continuation.

GBPUSD Technical Analysis – 4 hour Timeframe

On the 4 hour chart, we can see that we have a good support zone around the previous resistance now turned support where there’s also the 38.2% Fibonacci retracement level and the red 21 moving average for confluence. The buyers are likely to step in around this level with a defined risk below it to position for another rally into the 1.25 handle. The sellers, on the other hand, will want to see the price breaking lower to increase the bearish bets and target the previous lows.

GBPUSD Technical Analysis – 1 hour Timeframe

On the 1 hour chart, we can see that we have also an upward trendline adding an extra layer of confluence to the support zone around the 1.23 handle. If we get a bounce, the buyers should maintain the conviction to target new higher highs, but if the price breaks lower, the sellers are likely to get back control and take the GBPUSD pair back to the lows.

Upcoming Events

This week is pretty empty on the data front with just the US Jobless Claims on Thursday and the University of Michigan Consumer Sentiment on Friday. The market is likely to focus on the US Jobless Claims on Thursday given the recent weakness in the labour market data.