GBPUSD Technical Analysis – Flows dominate price action

Basic overview

The USD continues to be supported by good economic data, as we recently saw with the US PMIs last Friday and the US consumer confidence report this week. While these data keep interest rate expectations stable at around two rate cuts by the end of the year, they should also support risk appetite amid a growth recovery. This could be a headwind for the greenback.

The GBP, on the other hand, has been under pressure since the BoE decision, where the central bank sent some dovish signals and kept open the possibility of a rate cut in August. This week, the pound has been under pressure mainly due to the strength of the US dollar.

It looks like price action is being driven more by month-end, quarter-end and half-year-end flows than anything fundamental. We also had a major breakout in USDJPY yesterday and the flows there may have spilled over to other major pairs.

GBPUSD Technical Analysis – Daily Timeframe

On the daily chart, we can see GBPUSD retesting the support at 1.2635 as buyers continue to enter around this level to position themselves for a rally to new highs with a better risk-reward ratio. Sellers, on the other hand, will want to see the price break lower to gain more conviction and increase bearish bets to the 1.25 handle next.

GBPUSD Technical Analysis – 4-hour time frame

On the 4-hour chart, we can see that the downward momentum is fading as the lower lows are becoming shallower. This could be a signal of a trend reversal, although a break below could invalidate it.

Buyers will want to see the price break the downtrend line to gain more conviction and increase bullish bets on the 1.28 handle. Sellers, on the other hand, could lean on the trend line to position themselves for a break below support with a better risk-reward ratio.

GBPUSD Technical Analysis – 1-hour time frame

On the 1-hour chart, we can see that the upper limit of the average daily range for today is right around the trendline. It is unlikely that we will see an upside breakout today, but it will be something to watch over the next few days as the quarter-end flows subside.

Upcoming catalysts

Today we get the latest US jobless claims numbers and tomorrow we end the week with the US PCE report.

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