Nvidia, GBP/USD Forecast: Two trades to watch

GBP/USD holds steady ahead of US data drop

• USD extends its recovery
• US GDP & Jobless claims data are in focus
• GBP/USD tests 1.32 support

GBP/USD is falling on renewed U.S. dollar strength as it tests the key support of 132.

The US dollar has extended gains against its major pairs for a second straight day as traders anticipate US GDP and jobless claims data.

GDP is the second reading and is expected to confirm the preliminary reading showing strong growth of 2.8% annualised. Solid growth data will help support the view that the US economy is heading for a soft landing.

However, the main focus is likely to be on jobless claims, particularly after Federal Reserve chair Jerome Powell pointed to the labour market as a major driver of the US central bank's rate-cut outlook.

The market is 100% certain that the Fed will start cutting interest rates in the September meeting; however, traders are split over whether the Fed will start with a 25- or 50-basis-point rate cut.

At the Jackson Hole symposium, Fed Chair Powell said that the time has come to adjust policy; however, he also noted that the central bank is now more concerned about the risks to the labour market than inflation returning to 2%.

The pound has been supported by expectations that the Bank of England could keep interest rates restrictive for now. The Bank of England cut rates by 25 basis points in August and is not expected to do so again until November.

The UK economic calendar is quiet this week. Instead, attention has been on politics after UK Prime Minister Sir Keir Starmer warned that the autumn budget is going to be painful and hinted that labour could raise taxes in October.

Yesterday, Kier Starmer was in a Berlin meeting with German Chancellor Olaf Scholz amid plans to reset ties with the European Union in order to help spur growth in the UK.

GBP/USD forecast – technical analysis

GBP/USD broke out of its ascending channel before running into resistance at 1.3265. The pair has corrected lower and is testing support of the upper band of the rising channel at 1.32. The RSI is coming out of overbought territory.

Buyers will look to extend gains beyond 1.3265 and head towards a 1.33 round number on its way to 1.35.

Support can be seen at 1.3145, the July 2023 high, and below here, 1.30, the round number, comes into play.

Nvidia falls despite earnings beat.

• EPS at $0.68 on revenue of $30 billion, beating forecasts
• Current quarter guidance of $32.5 billion
• Nvidia is set to open 5% lower

Nvidia shares are set to open around 5% lower despite beating on the top and bottom line.

Q2 EPS came in at 0.68c, above expectations of 0.65c, and revenue came in at $30 billion, above expectations of $28.9 billion. Both earnings and revenue more than doubled across the past quarter as the AI darling of Wall Street continued its blockbuster growth thanks to solid demand for its AI chips.

However, the solid performance failed to impress a demanding crowd, and the share price fell as much as 8% in after-hours trade. This has pared slightly to 5% losses ahead of April.

The reasons for the decline are less clear, but the lofty valuation means that investors were pricing for perfection. Possible reasons for the selloff:

There were some buy-side whispers of revenue being closer to $33 or $34 billion, which meant that a beta of 430 billion was still slightly disappointing to some.

The current quarter guidance was $32.5 billion, which was good but not good enough for some who expected more.

Some critics may also have looked at Nvidia’s gross margin, which is slightly disappointing at 75.1%, down from 78.4% in the prior quarter, but that's still up from 70.1% in the second quarter of last year. Nvidia also said it expects a gross margin in the mid-70 % range; however, some expected a full-year margin of 76.4%.

Yet despite these points, there are many reasons to remain positive. There's no indication that demand is waning for Nvidia’s GPU, the main infrastructure for developing and running AI models.

Furthermore, the demand outlook is strong. Crucially, earnings reiterated the firm's lead in AI.  Analysts on Wall Street have maintained a bullish view on the stock, underpinned by Blackwell expectations, the next generation chip set to launch in the final quarter.

Nvidia forecast - technical analysis.

Nvidia is set to open 4% lower at 120 as the price continues to trade below a falling trendline and tests the 50 SMA support.

Should the support hold, buyers will look to rise above 128, the falling trendline resistance, and 130.00, the August high. Above here 136 and 140 the ATH comes into focus.

Should sellers break meaningfully below the 50 SMA and 120 level, this opens the door to a deeper selloff towards the 110 round number and 100 SMA and 100.