FundamentalOverview

The USD has been under somepressure in the last couple of weeks as the weaker US data and the selloff inthe US stock market increased the expectations for more easing by year-end withthe market now fully pricing in three rate cuts.

Today we get the US CPIreport and it could be a tricky one for the US Dollar. Logically one wouldexpect more weakness for the greenback in case we get a soft report, but wemight even see a counterintuitive short-term appreciation on a relief rally in equities.

A hot report, on the otherhand, might give the greenback a boost against the major currencies on risk-offflows although even here we could see the US Dollar depreciating amid fallinglong term Treasury yields with the market expecting the Fed holding off fromcutting even in the face of more economic slowdown and eventually leading tomore aggressive cuts.

On the GBP side, the recentnews on European defence spending boosted the pound as well given that the EUis UK’s largest trading partner. On the domestic front, the data continues toput the BoE in an uncomfortable position given the high wage growth and stickyinflation. The market expects just two rate cuts by the end of the year.

GBPUSDTechnical Analysis – Daily Timeframe

On the daily chart, we cansee that GBPUSD is trading right in the middle of two key levels. From a riskmanagement perspective, the buyers will have a better risk to reward setuparound the support zone around the 1.28 handle. The sellers, onthe other hand, will look for a break below the support to increase the bearishbets into the major trendline around the 1.26 handle.

GBPUSD Technical Analysis – 4 hour Timeframe

On the 4 hour chart, we’vebeen seeing some consolidation ahead of the US CPI release. If we get a spikeinto the 1.3046 level, we can expect the sellers to step in with a defined riskabove the level to position for a drop into the 1.28 handle next. The buyers,on the other hand, will want to see the price breaking higher to extend therally into new highs.

GBPUSD TechnicalAnalysis – 1 hour Timeframe

On the 1 hour chart, there’snot much we can add here as we have a rangebound price action and we have theUS CPI report coming out shortly. From a risk management perspective, it wouldbe better to wait for the release before taking new positions. The red linesdefine the average daily range for today.

Upcoming Catalysts

Today we have the US CPI report. Tomorrow,we get the US PPI data and the US Jobless Claims figures. On Friday, weconclude the week with the UK GDP and the University of Michigan ConsumerSentiment report.