GBPUSD Technical Analysis – The focus turns to the US NFP report

Fundamental
Overview

The USD continues to be
under pressure as the positive tariffs talks on Monday eased the trade war
fears and weighed on the greenback. In fact, trade war fears have been the only
thing keeping the bid under the USD as interest rate expectations and economic
data took the second place in importance.

As a reminder, the
repricing in rate cuts expectations reached the peak after the last US NFP
report and then the market returned into a dovish pricing following the benign
US inflation data (the market is still pricing roughly two rate cuts for 2025).

Today, we get the January
NFP and it could be another good report. That might lead to a short-term relief
rally for the US Dollar but as we’ve seen with the US Job Openings data, the
labour market continues to normalise and it’s not a source of inflationary
pressures anymore. So, the potential US Dollar rally might be faded.

That doesn’t mean that the
Fed will cut more than the two times projected for this year, but it also
doesn’t call for a more hawkish repricing yet. So, the path of least resistance
for the US Dollar (barring negative tariffs outcomes) might remain to the
downside as a more dovish path going forward looks more probable.

On the GBP side, the BoE
yesterday cut
interest rates by 25 bps as expected and we got a more dovish than expected
vote split with the known hawk member Mann even voting for a 50 bps cut.

The pound sold off
initially but then started to fade the weakness as the market focused on the
word “careful” that was added in the “gradual and careful approach to
the further withdrawal of monetary policy restraint is appropriate” line.

BoE’s
Bailey then doubled down on that saying that it was deliberate because of
the uncertainty they are facing, so that brushed aside the more dovish expectations
for the rates path triggered by the vote split.

GBPUSD
Technical Analysis – Daily Timeframe

On the daily chart, we can
see that GBPUSD is trading near the key resistance
zone around the 1.25 handle. This is where we can expect the sellers to step in
with a defined risk above the resistance to position for a drop into the 1.20
handle. The buyers, on the other hand, will want to see the price breaking
higher to increase the bullish bets into the 1.28 handle next.

GBPUSD Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can
see that we have an upward trendline defining the bullish momentum. If we get a
pullback into the trendline, the buyers will likely lean on the trendline
to position for a break above the resistance. The sellers, on the other hand,
will want to see the price breaking lower to increase the bearish bets into new
lows.

GBPUSD Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can
see that we are basically in the middle of nowhere. The only notable support
could be the higher low around the 1.2420 level where the buyers will look for
a bounce, while the sellers will look for a break.

From a risk management
perspective, it would be much better to wait for the US NFP report as any
technical setup can be invalidated in a blink of an eye when the data gets
released. The red lines define the average daily range for today.

Upcoming Catalysts

Today we conclude the week with the US NFP
report.

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