GBPUSD Technical Analysis – The pair is in a strong downtrend

<p>US:</p><ul><li>The Fed <a href="https://www.forexlive.com/centralbank/federal-reserve-interest-rate-decision-25-bps-rate-hike-to-525-550-20230726/">hiked by 25 bps</a> as
expected and kept everything unchanged at the last meeting.</li><li>Fed Chair Powell reaffirmed their data dependency
and kept all the options on the table.</li><li>The <a href="https://www.forexlive.com/news/us-august-cpi-06-mm-versus-06-mm-expected-20230913/">US CPI</a> last
week came in line with expectations, so the market’s pricing remained roughly
the same. </li><li>The <a href="https://www.forexlive.com/news/us-august-non-farm-payrolls-187k-vs-170k-expected-20230901/">labour market</a>
displayed signs of softening although it remains fairly solid.</li><li>The other important economic data like the ISM
Services PMI, Jobless Claims and Retail Sales all beat expectations recently. </li><li>The Fed members are leaning towards a pause in
September and the next decision will still be dictated by the economic data. </li><li>The market doesn’t expect the Fed to hike at the
September meeting, but there’s now basically a 50/50 chance of a hike in
November.</li></ul><p>UK:</p><ul><li>The BoE <a href="https://www.forexlive.com/centralbank/boe-raises-bank-rate-by-25-bps-to-525-as-expected-20230803/">hiked by 25 bps</a> as expected at the last
meeting. </li><li>The central bank seems to be leaning
more on the less hawkish side as a key line in the statement was tweaked to
indicate the propensity for a “higher for longer” stance rather than keeping
with additional rate hikes. </li><li>Key economic data like the latest <a href="https://www.forexlive.com/news/uk-august-payrolls-change-0k-vs-97k-prior-20230912/">employment report</a> showed a very high wage growth
despite the rising unemployment rate, and the <a href="https://www.forexlive.com/news/uk-july-cpi-68-vs-68-yy-expected-20230816/">UK CPI</a> beat expectations the last month pointing to a
stagflation. </li><li>The <a href="https://www.forexlive.com/news/uk-august-flash-services-pmi-487-vs-510-expected-20230823/">UK PMIs</a> recently missed expectations across the board
with the Services sector plunging into contraction.</li><li>The market expects the BoE to hike
by 25 bps this week and then remaining on hold for an extended period of time.</li></ul><p>GBPUSD Technical Analysis –
Daily Timeframe</p><p>On the daily chart, we can see that GBPUSD remains
in a clear downtrend with the price printing lower lows and lower highs and <a href="https://www.forexlive.com/Education/technical-analysis-understanding-moving-averages-20220425/">moving averages</a> being
crossed to the downside. The pair is now a bit overstretched, so we might see a
pullback soon, although a final selloff before the pullback into the 1.23
handle cannot be ruled out. From a risk management perspective, the sellers
will have another good opportunity around the downward <a href="https://www.forexlive.com/Education/technical-analysis-trendlines-20220406/">trendline</a> where
there will also be the <a href="https://www.forexlive.com/Education/technical-analysis-confluence-20220318/">confluence</a> with the
red 21 moving average. The buyers, on the other hand, will need the price to
break above the 1.26 handle to change the overall trend. </p><p>GBPUSD Technical Analysis –
4 hour Timeframe</p><p>On the 4 hour chart, we can see that the price is <a href="https://www.forexlive.com/Education/technical-analysis-understanding-divergence-20220429/">diverging</a> with the
<a href="https://www.forexlive.com/Education/technical-analysis-understanding-macd-20220427/">MACD</a> which is
generally a sign of weakening momentum often followed by pullbacks or
reversals. In this case, we might see a pullback into the minor downward
trendline and the <a href="https://www.forexlive.com/Education/technical-analysis-polarity-20220408/">support-turned-resistance</a> around
the 1.2440 level before another leg lower. If the price breaks above the
trendline, we can expect the buyers to pile in and extend the rally into the
1.2540 <a href="https://www.forexlive.com/Education/technical-analysis-support-and-resistance-20220405/">resistance</a>. That’s
where we will likely see the sellers piling in with more conviction and a
better risk to reward setup. </p><p>GBPUSD Technical Analysis –
1 hour Timeframe</p><p>On the 1 hour chart, we can see that we
have another divergence with the MACD which might be another confirmation that
a pullback into the 1.2440 level is indeed in the cards. We can also see that
we have a 38.2% <a href="https://www.forexlive.com/Education/technical-analysis-using-fibonacci-retracements-20220421/">Fibonacci
retracement</a> level right around the 1.2440 resistance
for further confluence. </p><p>Upcoming Events</p><p><a href="https://www.forexlive.com/EconomicCalendar">This week</a> has just a few important economic releases with
the FOMC and the BoE rate decisions being the highlight. Tomorrow, we will see
the latest UK CPI data, which is expected to impact the pound a lot as it will
influence market’s expectation for the next BoE rate path. Later in the day, we
will have the FOMC policy decision where the Fed is expected to keep rates
unchanged with the market focusing more on the Dot Plot and Fed Chair Powell’s
press conference. On Thursday, the BoE is expected to hike by 25 bps with the
market focusing more on the forward guidance while later that day we will also
see the US Jobless Claims report. Finally, we conclude the week with the UK and
US PMIs data on Friday.</p><p>See also the video below</p>

This article was written by FL Contributors at www.forexlive.com.