GBP/USD – could breach rising channel on weak UK PMI

EUR/USD - At one month low, Awaits Eurozone CPI

The pair fell to a one-month low in the last week, largely due to the hawkish comments from the Fed policymakers and an upbeat US core CPI data and Durable goods data. The strong data out of Germany were largely ignored by the markets, thereby pushing the pair below 1.1198 (76.4% Fib retracement of 1.1532-1.1096). The weakness in the last week was despite ECB President Mario Draghi’s optimism over the Eurozone economy. Even the Grexit is now temporarily not an immediate risk. Hence, the pair could see a sharp recovery in case the data out of Eurozone continues to surprise on the positive side.

On the hourly chart, the immediate resistance is seen at 1.1182. A break above the same could push the pair higher to 1.1243 levels. Meanwhile, a failure to rise above 1.1182-1.12 could see the pair fall to 1.1096 (Jan. 25 low). An upbeat final PMI number across the Eurozone could support the pair, however, the Eurozone preliminary CPI number would be more closely watched by the markets. An uptick in the core inflation from the previous figure of 0.6%, coupled with a slowdown in the fall in the headline CPI figure could help the pair rise to 1.1243 levels. However, a surprisingly weak print ahead of the ECB meeting this week could weigh heavily on the EUR. The hourly and 4-hour RSI has turned higher from the oversold zone, which could push the pair up to 5-DMA at 1.1220. Still, the bearish daily RSI could see a fresh selling pressure as we move closer to 1.1220-1.1243 levels.

GBP/USD – could breach rising channel on weak UK PMI

The GBP/USD pair is trading at 1.5406, which is the 23.6% retracement of 1.4949-1.5550 ahead of the UK PMI manufacturing data for February. The relatively hawkish comments from the Bank of England policymakers last week helped the British Pound outperform other currencies against the greenback. However, the cable repeatedly lacked the support of the UK Gilt yields, which weakened despite hawkish comments from BOE members. Consequently, the pair could not sustain the gains at 1.5550 and fell to 1.54 levels.

At the moment, the pair is trading at the rising channel support seen on the daily chart. Whether the rising channel is maintained depends upon the quality of the PMI report. The final manufacturing PMI for Febraury is seen rising slightly to 53.4, from the previous figure of 53.00. A weaker-than-expected print could send the pair down to 1.5342 levels. On the other hand, a slight uptick could push the pair to the 100-DMA located at 1.5450. Moreover, it would take a surprisingly strong PMI reading to see an upside move of more than 100-pips. In any case, the pair remains bearish so long as it trades below 1.5478 (23.6% retracement of 1.7190-1.4949).

USD/JPY – Could drop to 119.47

The USD/JPY pair has weakened from the Asian session high of 119.94 to trade at 119.77 as the 10-year Treasury yield in the US remains flat around 2%. The interest rate cut announced by China over the weekend failed to prop up the riskier assets. Consequently, the weakness in the Yen could not last long enough. A weak reaction to an interest rate cut could eventually see risk aversion and fall in the Treasury yields, thereby pushing the USD/JPY air lower.

On the hourly charts, the pair has formed a bearish price-RSI divergence,that could see the pair fall to its 5-DMA located at 119.47. On the flip side, a positive action in the European equities could push the up the Treasury yields. In such a case, a break above 119.94 could see the pair rise to 120.46 levels.