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GBPUSD Technical Analysis - NFP in focus

Following the latest FOMC meeting, the US economic data has been consistently surpassing expectations, leading to a reassessment of interest rate expectations towards a more hawkish stance in the market. In fact, Federal Reserve Chair Powell and other members of the Fed have expressed the view that if the data continues to exhibit strength, it would be appropriate to implement two or more rate hikes this year.

In contrast, the Bank of England (BoE) surprised the market by raising interest rates by 50 basis points during its recent meeting. This decision was prompted by a robust employment report and higher-than-anticipated inflation data leading up to the meeting. Governor Bailey of the BoE emphasized their commitment to being data-dependent and taking necessary measures to bring inflation back to its target level. Notably, the market is currently pricing in a terminal rate of 6.5% for the BoE, which exceeds even the projected rate of the Federal Reserve.

Upon examining the daily chart, it becomes evident that the red 21-day moving average played a pivotal role by providing support for the buyers. As a result, the price managed to rally and surpass the 1.2680 level. However, it is important to note that this week's price action has been characterized by choppiness and a rangebound movement, which is a common occurrence during significant events when market participants are uncertain about the next market direction. Much will depend on the forthcoming data releases, as they will greatly influence market sentiment and determine the future course of action.

Analyzing the 4-hour chart, it is apparent that the price has experienced a rally and successfully surpassed the 1.2680 level. Subsequently, it has retested this level several times, solidifying it as a robust support area. In the event that the price breaks below this level, it is anticipated that sellers will enter the market aggressively, leading to a further decline towards the trendline. The ultimate objective for sellers would be to initiate a breakout below the trendline and potentially extend the downward move.


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