Basic overview
The US Dollar is still consolidating around the highs although it is stronger against commodity currencies. In the bigger picture, the market reached a peak in interest rate repricing, and stronger reasons will be needed to price the remaining rate cuts for 2025.
In fact, despite a lot of strong data from the US, the market prices remain unchanged around three rate cuts by the end of 2025. The focus is now on the US CPI report. It seems the Fed really wants to cut next week before pausing for several months. Therefore, we may need an upside surprise in the headline inflation numbers to make them change plans.
Even if the Fed decides to cut next week despite a hot CPI, the market is likely to ease further with the rate cut expectations for 2025 and that could slightly risk disruption caused by the general accumulation of the US Dollar. The best conditions would be a soft report with the conditions far too far behind the green. In such a case, we can expect the US Dollar to sell across the board.
On the GBP side, the latter UK CPI the report came in higher than expected. BoE members felt a little worse recently and although BoE Governor Bailey expect four rate cuts by the end of 2025, the market believes otherwise seeing three rate cuts as the most likely scenario for now.
GBPUSD Technical Analysis – Daily Time Chart
GBPUSD daily
On the daily chart, we can see that GBPUSD managed to break above the main down line of motion. The bullish trend could intensify now but support from the unusual US CPI will be needed today as a hot report is likely to boost the USD. The sellers will want to see the price break below the main trend line up to position to drop into the 1.23 handle next.
GBPUSD Technical Analysis – 4 hour timeframe
GBPUSD 4 hours
On the 4 hour chart, we can see that we have a small uptrend defining the current bullish trend. We also have a strong group support
zone around the 1.2715 level which should provide the buyers with a strong technical level where they will continue with a marked risk below the support. On the other hand, the sellers want to see the price break lower into a position to fall into the main uptrend.
GBPUSD Technical Analysis – 1 hour timeframe
GBPUSD 1 hour
On the 1 hour schedule, there isn't much else we can add here as today's US CPI report should decide where we go next. A break above the resistance around the 1.2780 level should increase the bullish trend. The red lines define the average daily range for today.
Catalysts to come
Today we get the US CPI report. Tomorrow, we have US Jobless Claims and US PPI. Finally, on Friday we finish the week with UK GDP.
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