GBP/USD regains the 100-day SMA as US yields sink

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• GBP/USD rose above the 1.2645 area and reconquered the 100-day SMA.
• JOLT’s Job Opening figures hinted at a softening of the US Labour market. 
• US dived as markets are pricing in rate cuts in June 2024.
• Food inflation in the UK declined in August.

In Tuesday’s session, the USD weakened against most of its rivals, driven by weaker-than-expected employment data, which fueled dovish bets on the Federal Reserve (Fed). In addition, the GBP also traded weak against most of its rivals following the release of food inflation figures from the UK in August.

The US Bureau of Labor Statistics reported that the JOLTs Job Openings figures from the United States missed the consensus in July. The actual figure came in at 8.82 million, lower than the expected  9.465 million from the previous reading of 9.16 million. As a reaction, the 2-year yield led to a decline in the US bond rates, falling by more than 3% to its lowest level in almost three weeks. That fall could be explained by markets now pricing in rate cuts by the Fed in June while markets placed bets on July in the previous sessions.

On the other hand, the British Retail Consortium reported a decrease in shop price inflation, which dropped to 6.9% YoY from 7.6% in July. That being said, hawkish expectations on the Bank of England (BoE) remain steady, and the World Interest Rates Probabilities (WIRP) tool suggests that markets are factoring in a 75% probability of a 25bps hike by the upcoming Sep 21, 2023 meeting from the Bank of England (BoE). Looking ahead, the likelihood of a similar hike stands at 80% in November, followed by a 90% chance of a 25bps hike in the December meeting, bringing the target rate to 6%. In that sense, tightening expectations may limit the GBP’s losses. 

 GBP/USD Levels to watch 

 Considering the daily chart, GBP/USD presents a neutral to bullish outlook, with the bulls showing resilience and gaining momentum. The Relative Strength Index (RSI) holds a positive slope below its midline, while the Moving Average Convergence (MACD) histogram exhibits decreasing red bars. Furthermore, the pair is below the 20-day Simple Moving Average (SMA) but above the 100 and 200-day SMAs, indicating that the bulls still have the upper hand when looking at the broader picture.

 Support levels: 1.2642 (100-day SMA), 1.2600, 1.2550.

 Resistance levels: 1.2670, 1.2700 (20-day SMA), 1.2730.

 GBP/USD Daily Chart