GBPUSD Technical Analysis – The USD weakens on soft data

Fundamental
Overview

The US Dollar has come back
under pressure recently as we got a couple of soft US data. The US ISM Manufacturing PMI disappointed the market as it came
lower than expected and the new orders index dropped further into contraction.
The US Job Openings yesterday showed some more cooling
as the data missed expectations by a big margin. The Treasury yields fell as a
consequence and weighed on the greenback.

In fact, the recent
appreciation of the GBP has been mostly driven by the US Dollar side of the
equation. From a monetary policy perspective, there’s now a 50/50 chance of
either a 25 or 50 bps cut at the upcoming FOMC meeting, so the NFP report
tomorrow will decide by how much the Fed is going to cut. For the BoE, the market sees a 75%
probability of no change at the upcoming meeting with a total of 42 bps of
easing by year-end.

GBPUSD
Technical Analysis – Daily Timeframe

On the daily chart, we can
see that GBPUSD eventually pulled back to the 1.31 handle where we got a bit of
a consolidation as we await the US NFP report tomorrow. If the price falls
below the recent low, we have a nice support
around the 1.3050 level where we can find the confluence
of the previous swing high and the 38.2% Fibonacci
retracement level.

That’s where we can expect
the buyers to step in with a defined risk below the level to position for new
highs. The sellers, on the other hand, will want to see the price breaking
lower to increase the bearish bets into the trendline.

GBPUSD Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can
see that the price broke above the minor downward trendline recently as the US
data came in of the softer side. This could be a signal of the end of the
pullback with new highs ahead but everything hinges on the US NFP report tomorrow.

GBPUSD Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can
see that we have a minor upward trendline defining the current bullish momentum
on this timeframe. We can expect the buyers to lean on the trendline to
position for new highs, while the sellers will want to see the price breaking
lower to pile in for a drop into the 1.3050 support. The red lines define the average daily range for today.

Upcoming
Catalysts

Today we have the US ADP, the US Jobless Claims and the US ISM Services PMI.
Tomorrow, we conclude the week with the US NFP report.

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