GBPUSD Technical Analysis – The BoE weighs on the Pound

Fundamental
Overview

The USD last week finished
slightly positive but overall, it was a pretty flat week. We got some great US PMIs on Friday which showed growth without
inflationary pressures. In fact, despite the strong PMIs the market pricing for
interest rates remained unchanged. That should be positive for risk sentiment
for the time being.

The GBP, on the other hand,
got pressured mainly because of the BoE
policy decision where the central bank dropped some dovish
signals and kept the door open for a rate cut in August. Moreover, the disappointing
UK
PMIs on Friday led to some more weakness, although they were reversed after
the US PMIs. The mood in the markets has been gradually improving and that
should be positive for the Pound.

GBPUSD
Technical Analysis – Daily Timeframe

On the daily chart, we can
see that GBPUSD eventually dropped all the way back to the 1.2635 support following
the dovish BoE hints and the disappointing UK PMIs.

This is where we can expect
the buyers to step in with a defined risk below the support
to position for a rally into the 1.29 handle. The sellers, on the other hand,
will want to see the price breaking lower to increase the bearish bets into the
1.25 handle next.

GBPUSD Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can
see that we have also the 38.2% Fibonacci retracement level of the entire rally since
April standing around the 1.2635 level which technically strengthens the support
level. The buyers will need to defend this level as a break below it could see
the bearish momentum increasing.

GBPUSD Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can
see that we have some rangebound price action around the support as it looks
like the market is bottoming out here. A break above the latest lower high at
1.2675 should give the buyers some more conviction for a rally with the next target
standing around the 1.2740 level. The red lines define the average daily range for today.

Upcoming
Catalysts

This week is a bit light on the data front although we will still get to see some
important releases. We begin tomorrow with the US Consumer Confidence where the
market will be focused on the labour market details. On Thursday, we get the
latest US Jobless Claims figures, while on Friday we conclude the week with the
US PCE.

This article was written by Giuseppe Dellamotta at www.forexlive.com.