GBPUSD Technical Analysis – Choppy price action amid risk-off flows

Fundamental Overview

The USD continues to be supported against most major currencies, especially the commodity currencies, as the markets remain in a risk-off mood following some bad US data releases. In fact, since last Friday, we got weak US Flash Services PMI, UMich final Consumer Sentiment and yesterday a weak US Consumer Confidence report.

The problem is that we’ve also got inflation expectations jumping to new highs in both the UMich and the Conference Board report. The market might be fearing that in case we get a slowdown, the Fed might not be fast enough in cutting rates amid inflation remaining above target and uncomfortably high long-term inflation expectations.

This is something to keep in mind in light of the next NFP and CPI reports coming out before the March FOMC decision where we will also get the updated SEP and Dot Plot.

On the GBP side, the data continues to put the BoE in an uncomfortable position given the high wage growth and sticky inflation. The market sees at least two rate cuts by the end of the year.

GBPUSD Technical Analysis – Daily Timeframe

On the daily chart, we can see that GBPUSD is trading right in the middle of two key levels. From a risk management perspective, the buyers will have a better risk to reward setup around the support zone around the 1.25 handle. The sellers, on the other hand, will look for a break below the support to increase the bearish bets into the 1.20 handle next.

GBPUSD Technical Analysis – 4 hour Timeframe

On the 4 hour chart, we can see that the price action is confined in a rising channel. The buyers will likely lean on the bottom trendline to position for a rally into the 1.28 handle. The sellers, on the other hand, will look for a break lower to pile in for a pullback into the 1.25 support.

GBPUSD Technical Analysis – 1 hour Timeframe

On the 1 hour chart, there’s not much we can add here as the buyers will look for a bounce around the bottom trendline, while the sellers will look for a break lower. The red lines define the average daily range for today.

Upcoming Catalysts

Tomorrow we get the latest US Jobless Claims figures, while on Friday we conclude the week with the US PCE data.