The GBP/USD pair dipped to a low of 1.5537 on Monday, before ending the day slightly higher at 1.5557. The demand for the US dollar remained strong on the back of hawkish comments from the Fed officials.
BOE minutes – Watch out for hawkish surprise
The markets may be in for a surprise, in case the BOE PMC minutes show one or two votes in favour of lift-off. The BOE may have begun telegraphing the rate hike a little more aggressively; which is evident from Carney’s comments last week that the rates could rise at the turn of the year. The GBP is likely to strengthen across the board, in case, the minutes do show a vote or two in favour of a lift-off. The cable could rise to 1.56, while GBP is expected to strengthen most against NZD and other commodity currencies and low yielding European currencies. However, the BOE minutes may also throw a word of caution regarding the EUR/GBP exchange rate.
Technicals – Bullish above hourly 200-MA
The spot currently trades at 1.5565. Repeated failure to break below 1.5549 (50% Fib R of June rally) is likely to push the spot higher towards 1.5590-1.5607 (23.6% Fib of Apr-Jun rally). On the downside, only a break below the hourly 200-MA at 1.5544 could open doors for further fall to 1.55. Overall, the possibility of n jump to 1.5590-1.5607 is high since, the spot has managed to sustain above the inverted head and shoulder neckline (extended dotted black line) located at 1.5544 (also hourly 200-MA).
EUR/USD analysis – Falling Greek uncertainty hurts EUR
The EUR/USD pair rose to an intraday high of 1.0869 on Monday, before finishing lower at 1.08223 levels. The common currency weakened after news reports confirmed Greece was able to repay the ECB for the bonds that matured Monday and pay the IMF for the June 30 missed payment.
EUR suffers double whammy
The common currency is being ditched on falling Greek uncertainty, which underscores the fact that the EUR is increasingly being used as the funding currency. Meanwhile, falling Greek uncertainty also puts monetary policy divergence at the Centerstage. Moreover, Fed is now one step closer to a rate hike this year as rout in Chinese equities seems to have stalled, while the probability of Grexit has dropped. Consequently, the spot could extend weakness to 1.0785 and 1.07 levels.
Technical – Downtrend resumes?
An intraday break below 1.0817 (May low) indicates the fall from May high of 1.1465 could resume. A stronger confirmation of the same would be a daily close below 1.0817. However, a sharp fall in last one week or so could lead to a short-term consolidation, with a possibility of a dip towards 1.07, followed by a technical correction owing to the then oversold RSI on the intraday time frame. On the higher side, a break above hourly 50-MA (strong resistance since July 14) currently located at 1.0841 could open doors for 1.0869-1.0906.
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