GBPUSD

The GBP/USD pair fell to a low of 1.5565 in the early European session on Thursday before moving back to 1.56-1.5610 band on a stronger-than-expected UK construction PMI figure. The spot then rose to a high of 1.5640 on a disappointing US non-farm payrolls report, but failed to sustain and fell back to 1.56-1.5610 band.

Though the rate hike bets dropped due to the disappointing data sets released today in the US, the pair failed to take out the Fib resistance at 1.5638 (38.2% Fib R of June rally). So far this week, we have had a disappointing manufacturing PMI data and an upbeat construction PMI release in the UK. But the real test comes today in the form of service sector PMI (exp 57.4, prev 56.5). Given the service activity contributes more to the UK GDP, a weak print could lead to a fresh sell-off in the pair. On the other hand, a positive figure could have a stabilizing effect on the pair. A rally may not be seen on account of the uncertainty surrounding the Greek referendum on Sunday.

At the moment, the pair is trading around 1.5606 (23.6% Fib R of 1.4564-1.5928). Given the failure to take out 1.5638 (38.2% Fib R of June rally), despite of a weak US data, the pair is likely to drop below 1.5606 and extend losses to 1.5569 (38.2% Fib R of July 2014-April 2015 plunge)- 1.5550 (50% Fib R of June rally). In case of a weak services PMI the pair could dip below 1.5550, however, further bearishness is seen only if the spot manages to close below 1.5550 levels. On the higher side, a break above 1.5638 could see the pair re-test 1.5667. The losses in the GBP/USD pair could be restricted by the possible selling in the EUR/GBP cross ahead of Sunday’s Greek referendum.


EUR/USD Analysis: USD could gain irrespective of a No vote or Yes Vote

EURUSD

The EUR/USD pair is trading closer to 1.11 handle on Friday after a dismal payrolls report in the US led to a broad based USD weakness on Thursday. With US markets closed, the attention is now on the Greek referendum scheduled on Sunday. A ‘Yes’ vote is widely perceived as positive, but it could lead to snap election if PM Tsipras keeps his pledge and resigns. On the other hand, a ‘No’ vote would open doors for Grexit.

In either case, it appears that the US dollar could strengthen. In case of ‘No’ vote, a rise in safe haven demand for the US treasuries would be supportive for the US dollar. In case of ‘Yes’ vote, the safe haven demand for Treasuries could be seen in the Greek PM resigns. In case, the Greek PM does not keep his pledge, a risk on sentiment could push the USD higher (risk currency as Fed could move rates). The USD had rallied last Friday on hopes of last minute deal.

Consequently, the investors may refrain from making big bets on the USD today, as there is a risk of gap up/gap down opening on Monday. The services PMI reports due across the Eurozone could be overshadowed by the uncertainty surrounding the Greek referendum.

On the charts, the pair closed above the rising trend line resistance on Thursday. Consequently, a break above the hourly 100-MA at 1.1119 could see the spot rise to 1.1150 (hourly 200-MA). On the downside, a break below 1.1076 (rising trend line support) could open doors for a sell-off to 1.1006 (100-DMA). Overall the pair could remain in a range of 1.1027 (5-MMA) to 1.1150 (hourly 200-MA) ahead of Sunday’s Greek referendum.

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