GBP/USD grinds higher, but bears eye break of 1.20
US producer prices, manufacturing and housing data in focus
No miracles will be expected for US housing data given the Fed’s hikes, but it will be interesting to see if the Philadelphia Fed Manufacturing Index contracts at a much faster pace, like the NY State Empire equivalent did yesterday. And with US retail sales hitting a near 2-year high and inflation hotter than expected, all evidence points towards a soft landing for the US and a case for more hikes. And that view could be bolstered if US producer prices come in hotter than expected today – and it could further support the US dollar on hawkish bets.
GBP/USD 1-hour chart:
Whilst GBP/USD has dragged itself from its post-CPI lows, key resistance looms and momentum could favour further downside. Yesterday’s soft-than-expected inflation report for the UK came as a welcomed surprise, which helped the pound quickly erase all of Tuesday’s hot employment gains. After briefly trading below 1.20, GBP/USD has produced a countertrend move in the form of a potential bear channel / flag. Given the relative hawkishness of the Fed and strong US data, my bias for GBP/USD to break below 1.20. So I’m now looking for evidence of a swing high around or below the weekly and daily pivot points (a break above which invalidates the bearish bias).
Note that the downside band of 1-day implied volatility is just beneath the daily and weekly S1 pivots, and the downside band for 1-week IV is just below 1.1800.
No miracles will be expected for US housing data given the Fed’s hikes, but it will be interesting to see if the Philadelphia Fed Manufacturing Index contracts at a much faster pace, like the NY State Empire equivalent did yesterday. And with US retail sales hitting a near 2-year high and inflation hotter than expected, all evidence points towards a soft landing for the US and a case for more hikes. And that view could be bolstered if US producer prices come in hotter than expected today – and it could further support the US dollar on hawkish bets.
GBP/USD 1-hour chart:
Whilst GBP/USD has dragged itself from its post-CPI lows, key resistance looms and momentum could favour further downside. Yesterday’s soft-than-expected inflation report for the UK came as a welcomed surprise, which helped the pound quickly erase all of Tuesday’s hot employment gains. After briefly trading below 1.20, GBP/USD has produced a countertrend move in the form of a potential bear channel / flag. Given the relative hawkishness of the Fed and strong US data, my bias for GBP/USD to break below 1.20. So I’m now looking for evidence of a swing high around or below the weekly and daily pivot points (a break above which invalidates the bearish bias).
Note that the downside band of 1-day implied volatility is just beneath the daily and weekly S1 pivots, and the downside band for 1-week IV is just below 1.1800.
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A nice pullback into the resistance zone before dollar strength (and GB weakness thanks to the softer UK CPI report) helped push this down to the support zone.
We wish they all worked out this well.
We wish they all worked out this well.
