Basic overview
The USD has been a bit weaker recently due to lower than expected US inflation figures last week which sent Treasury yields lower and caused the market to price in more opportunities height of second level cut before the end of the year.
We've also had a lot of whipsaws in the last couple of days caused by tax headlines. On Monday, the greenback weakened after a WSJ report says Trump would release the trade outlook but not yet impose tariffs.
Yesterday, on the other hand, the US Dollar strengthened as Trump spoke to the media and said that he plans to impose 25% taxes on Canada and Mexico next week. Those benefits were later erased, but Trump certainly brought more instability.
On the GBP side, the UK CPI Last week's report missed general expectations by a wide margin and reinforced market expectations for a 25 bps cut at the upcoming BoE meeting. The UK employment this week's report again showed weakness in the labor market although wage growth remains very hot.
As a reminder, the BoE we kept the Bank Rate unchanged as expected in the last policy decision but got a worse vote split than expected as 3 voters wanted a rate cut compared to just 1 expected . Policy makers are still pushing for four rate cuts this year compared to just two that the market is expecting.
GBPUSD Technical Analysis – Daily Time Chart
GBPUSD daily
On the daily chart, we can see that GBPUSD is testing a key the face zone around the 1.2350 level. This is where we can expect the sellers to step in with a marked risk overhead against a position to fall back to lows. The buyers, on the other hand, want to see the price break higher to increase the bullish bets into the main line of motion.
GBPUSD Technical Analysis – 4 hour timeframe
GBPUSD 4 hours
On the 4 hour chart, we can see that we now have an upward trend line defining the current bullish trend. If the price were to pull back into it, we can expect the buyers to continue the trend to position for a rally into the main trend. On the other hand, the sellers want to see the price break lower to increase the bearish bets to low levels.
GBPUSD Technical Analysis – 1 hour timeframe
GBPUSD 1 hour
On the 1 hour chart, there is not much else we can add here as the buyers will be looking for a break higher to target the main trend, while the sellers will be ' look for a rejection position to pull them back into the uptrend line. The red lines define the average daily range for today.
Catalysts to come
Tomorrow we'll be getting the latest US jobless claims numbers, and on Friday we'll finish the week with Flash UK and US PMI.
