fundamental overview
USD:
The US dollar weakened earlier this week as oil prices fell following G7 discussion about releasing emergency oil reserves. The move accelerated after Trump told CBS that “the war may end soon.” Traders began trimming some of their positions as markets backed off tight interest-rate bets on expectations of a quick resolution, putting pressure on the greenback.
However, the trend reversed after reports that US intelligence had found indications that Iran could deploy mines in the Strait of Hormuz, sending the market back into risk-off mode. Oil prices began rising again and bullish rate expectations quickly returned.
Yesterday, Trump told Axios that there is practically nothing left to target in Iran and that the war will soon end. Unfortunately, the market is no longer accepting the “war ending soon”. His comments were largely ignored, as traders now want to see a clear and definitive end to the conflict. Until that happens, the US dollar is likely to remain supported.
GBP:
On the GBP side, traders have ended all expectations of a rate cut and are now estimating a near 40% chance of a rate hike by the end of the year. Several other central banks have seen similar changes, as higher oil prices have sent markets anticipating stronger inflation in the coming months and left less room for policymakers to lower rates.
On the data front, meanwhile, not much has happened to move the market. Tomorrow we get the UK monthly GDP report, but it will probably be ignored as all the pre-war figures are old news.
GBPUSD Technical Analysis – Daily Time Frame
GBPUSD – Daily
On the daily chart, we can see that GBPUSD rejected the key falling trend line and started falling again as the US Dollar bids return. Sellers will likely continue to push to new lows with a defined risk on the trendline, while buyers will look to see the price break higher for a rally into the 1.36 handle next.
GBPUSD Technical Analysis – 4 Hour Time Frame
GBPUSD – 4 Hour
On the 4-hour chart, we have an upward trend line that can act as support. From a risk management perspective, buyers would be better off taking a break above the key downward trendline and rewarding setups around the trendline to target new highs. On the other hand, sellers will look for a break below the above trend line to extend bearish bets to new lows.
GBPUSD Technical Analysis – 1 Hour Time Frame
GBPUSD – 1 hour
On the 1-hour chart, we have a small falling trend line defining bearish momentum on this time frame. Sellers will likely continue to lean on the trendline with a defined risk above it to push to new lows, while buyers will look for a break above the key downward trendline to begin targeting a break above it. The red lines define the average daily range for today.
upcoming catalyst
Today we got the latest US jobless claims figures. Tomorrow, we conclude the week with the US PCE price index, the University of Michigan consumer sentiment survey and job openings data. As a reminder, the market’s focus right now is entirely on the US-Iran war, so the data doesn’t matter much.
