Fundamental
Overview
The USD performance has
been mixed in the past days but still on net negative despite the decreasing
December rate cut odds. It looks like the stock market is what has been driving
all other markets.
In fact, when the stock
market had positive days, we’ve seen Treasury yields and the US dollar rising,
but when stocks performed poorly, Treasury yields and the greenback gave back
the gains. The market might be thinking that a selloff in the stock market is
going to weigh significantly on the economy, eventually requiring the Fed to
cut more or more aggressively.
The focus now is of course
on the Fed and the US labour market data ahead of the December FOMC meeting. The
market pricing is now showing just a 42% chance of a cut in December, so the
data will have the final say.
I don’t think the September
NFP tomorrow is going to matter much if it’s soft given that it’s old data
(jobless claims will actually be more important for me), but a strong report
might be taken as meaningful because the market could think that conditions
were already getting better in September before the two rate cuts.
Therefore, I think the
November NFP is going to have the final say, which will hopefully get released
just before the FOMC meeting in December (we won’t get the November CPI in
time).
On the GBP side, the BoE
held the Bank Rate steady with a 5-4 vote split. In the press conference, BoE
Governor Bailey sounded like a December cut was conditional on a confirmation
of the improvement in inflation.
The latest UK employment
report missed across the board and raised the probabilities for a December cut
to 80%. Today, we got the UK CPI report and, although the data was mostly in
line with expectations, the rate cut probabilities increased to 85%.
The BoE will still get another
employment and inflation report, so they will have enough data to make a better
decision.
GBPUSD
Technical Analysis – Daily Timeframe
On the daily chart, we can
see that GBPUSD reached the 1.32 handle before pulling back a bit. We have a
major downward trendline defining the bearish structure. If the price rallies
into the trendline, we can expect the sellers to lean on it with a defined risk
above it to position for a drop into the 1.2712 level. The buyers, on the other
hand, will want to see the price breaking higher to pile in for a rally into
the 1.34 handle next.
GBPUSD Technical
Analysis – 4 hour Timeframe
On the 4 hour chart, we can
see that we have a strong support zone around the 1.31 handle where we got
several rejections in the past weeks. If the price gets there, we can expect
the buyers to step in with a defined risk below the support to position for a
rally into the major trendline targeting a breakout. 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, there’s
not much else we can add here as the buyers will look for longs around the support,
while the sellers will look for shorts around the major trendline or on the
break below the support. Tomorrow, we get the September NFP
report and the US Jobless Claims data
