GBPUSD Technical Analysis – Watch these signs for a possible turnaround

<p>The big USD selloff
following the miss in the US CPI report has been recently completely erased as
the US data continued to surprise to the upside and keep the chances of a rate
hike after the July increase alive. In fact, the <a href="https://www.forexlive.com/news/us-initial-jobless-claims-228k-vs-242k-estimate-continuing-claims-1754m-vs-1729m-est-20230720/">US Initial Claims</a> last week beat expectations and
fell to record lows while the <a href="https://www.forexlive.com/news/us-july-flash-sp-global-services-pmi-524-vs-540-expected-20230724/">US PMIs</a> yesterday showed a mixed picture although the
Manufacturing PMI beat expectations by a big margin. The Fed is expected to
hike by 25 bps this week and remain data dependent. So, if we keep on getting
good economic data, another rate hike is very likely. </p><p>Conversely, the <a href="https://www.forexlive.com/news/uk-june-cpi-79-vs-82-yy-expected-20230719/">UK CPI</a> last week missed expectations across the board
and triggered a big repricing in interest rates expectations. In fact, the
market was pricing a higher chance of a 50 bps hike prior to the report given
the higher wages data in the previous UK <a href="https://www.forexlive.com/news/uk-june-payrolls-change-9k-vs-23k-prior-20230711/">employment report</a>. Now, the market sees a higher
chance that the BoE hikes by 25 bps at the upcoming meeting and this repricing
weighed on the GBP.</p><p>GBPUSD Technical Analysis –
Daily Timeframe</p><p>On the daily chart, we can see that GBPUSD surged
to the 1.31 handle and then started to roll off. The first leg lower was caused
by the beat in the <a href="https://www.forexlive.com/news/usa-june-retail-sales-02-versus-05-expected-20230718/">US Retail Sales Control Group</a>. Then we
got the big miss in the UK CPI report that weighed heavily on the GBP and took
the pound lower as the market repriced interest rates expectations on the less
hawkish side. </p><p>Finally, the beat in the US Initial Claims pushed
Cable even lower to eventually erase the entire prior week of gains. The price
is now trading around the red 21 moving average, which
is generally a good dynamic support and resistance level. </p><p>GBPUSD Technical Analysis –
4 hour Timeframe</p><p>On the 4 hour chart, we can see that the price is
starting to slowly bottoming out around the 1.2847 support. In
fact, we can see that there’s a <a href="https://www.forexlive.com/Education/technical-analysis-understanding-divergence-20220429/">divergence</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, the buyers should have more conviction in a resumption
of the uptrend if the moving averages cross to the upside. That would be a good
confirmation for a bounce and another possible rally. </p><p>GBPUSD Technical Analysis –
1 hour Timeframe</p><p>On the 1 hour chart, we can see that the
price action is forming a falling <a href="https://www.forexlive.com/Education/chart-patterns-guide-20220125/">wedge pattern</a> around
the 1.2847 support, which is confirmed by the divergence with the MACD given
that these patterns are divergent in nature. If the price breaks out to the
upside, we should see the buyers piling in and target the 1.2950 level. The
sellers, on the other hand, are likely to lean on the upper bound of the
pattern to position for a breakout lower and target the 1.27 handle. </p><p>Upcoming Events</p><p>Today we have the US
Consumer Confidence report. The last time, we saw a big beat in the report and
if we get another one today, we are likely to see some more US Dollar strength,
while a miss should cause some more weakness. Tomorrow, the Fed is expected to
hike by 25 bps and the market will want to see if the hint to something else or
they just reaffirm their data dependency. On Thursday, the US Jobless Claims
should support the USD in case the data beats expectations and weaken it if the
data misses. Finally, on Friday, we will see the latest US PCE and ECI reports.
</p>

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