The GBP/USD pair jumped to 1.43 levels in the European session and extended gains further to a high of 1.4445 in the US session on the back of a broad based USD weakness triggered by a weak US PMI manufacturing and personal spending data. The major takeaways from the US data released yesterday are – the savings rate in December rose to highest since Dec 2012 (as income rose, but spending dropped) and ISM manufacturing employment index dropped to 45.9 in Jan from 48.0 in Dec.
Eyes UK construction PMI
Cable’s corrective rally from the multi-year low of 1.4079 could receive another shot in the arm today if the construction PMI for January prints more than the estimated drop to 57.6 from 57.8. This is the least important PMI when compared to the other two – manufacturing and services. Nevertheless, a better-than-expected construction PMI would be welcome development. Again, the single most important component of the construction PMI (apart from the headline) is the employment sub-index. A rise in construction sector employment would be good news but may receive little immediate attention from the markets. Later in the day, Fed’s George’s comments would be watched out for any hints regarding the next rate hike.
Technicals – Next stop at 1.4476 after bullish daily close
Sterling’s rebound from the falling trend line support (marked by red circle) on Friday, followed by a bullish daily closing above 1.4413 (Friday’s high) has opened doors for a rise to 1.4476 (immediate resistance on the hourly chart).
A break higher would expose 1.4516 (23.6% of 1.5930-1.4079).
Fresh bids are seen coming-in so long as the pair stays above the rising trend line support on the hourly chart currently seen at 1.4340.
An hourly close below the rising trend line support would warrant caution as the pair may slip further to next support seen at 1.4249.
EUR/USD Analysis: Eyes confluence of Fibo and falling trendline resistance at 1.0940
The EUR/USD pair rose to an intraday high of 1.0919 on the back of a moderate risk aversion in equities and weak US data. The PMI numbers across Eurozone once again received little/no attention from the markets. This has been the case ever since the EUR became a funding currency (after ECB introduced (-ve deposit rates). Moreover, the funding currency is more responsive to action in the risk assets and only tracks critical data sets like – inflation numbers in EZ and US data.
The German unemployment change and the Eurozone unemployment rate due today could be ignored as well. A few pips move here and there cannot be ruled out, but a major trend change is unlikely following the German/EZ data release. Meanwhile, the economic calendar in the US is light as well. Hence, the common currency remains at the mercy of the equity market sentiment and broad based demand for the US dollars.
Technicals – Eyes 1.0940
Euro’s rising bottom formation on the 4-hour chart, coupled with a bullish break from the falling channel indicates the currency is likely to make a go at the confluence of the falling trend line resistance and 61.8% of Mar-Aug rally seen at 1.0940.
Only an hourly close above 1.0940 would open doors for a further rally to 1.10 levels
On the other hand, a failure take out 1.0940 could see the pair revisit the rising trend line (blue) support currently seen at 1.0820.
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