GBP/USD Forecast: Awaits US durable goods data

The GBP/USD finished lower for the week. The pair reached a top at 1.5671 on last Thursday before turning lower to print a low of 1.5467 on Friday. The Pound came under pressure across the board after the release of a weaker-than-expected U.K. Retail Sales report on July 23. This report showed that retail sales fell unexpectedly by 0.2%.

Focus on timing of rate hike

The week ahead is full of critical economic reports that could influence the rate hike expectations in the UK and the US. The UK preliminary GDP report on Tuesday, July 28 is expected to show an increase of 0.7%. The US reports advance GDP on Thursday, July 30 is expected to show a reading of 1.5%. Ahead of the reports, the tone on the GBP is likely to remain weak, mainly on account of weak retail sales released last week. Furthermore, the drop in the energy prices is also likely to drag the GBP lower.

Macro data due today–

UK data CBI total trends orders (July) - expected -6, previous -7

US durable goods orders (June) - expected 3.2%, previous -2.2%

The durable goods print in the US could turn out the be the major market mover today. The focus would be more on the core durables print, which is expected to show a modest rebound. Moreover, a weak figure would once again raise questions about whether the economy would be able to sustain rate hike and could trigger a technical correction in the GBP/USD pair, pushing it above 1.5549 (50% of June rally).

Technicals – bearish below 1.5549

The spot currently trades at 1.5530, after having recovered from the Friday’s low of 1.5467. The pair recovered above the inverted head and shoulder neckline currently located at 1.5507. However, fresh bids are seen only above 1.5549 (50% of June rally). The 50-DMA resistance is also located at 1.5550, while the weekly 50-MA is located at 1.5557. Meanwhile, a rise to 1.5549 followed by a drop below 1.5528 (support on the hourly chart) could open doors for a sell-off to Friday’s low at 1.5467.

EUR/USD Analysis: Re-takes 1.10, for how long?

The EUR/USD pair hit a low of 1.0925 on Friday after the Fed’s staff projection showed they expect a quarter-point increase in US rates by year-end. The Eurozone PMI dropped to two-month low, while the US new home sales tumbled to 7-month low. The spot recovered losses to finish marginally weak on Friday at 1.0976.

Eyes US durable goods data

With the Greek crisis out of the picture for now, the EUR could be ditched in favour of high yielding currencies, in case the US durable goods prints higher than expected. The focus would be more on the core durable figure, which has painted a dismal picture since the past year. The declining exports and the drop in the capital expenditure in the energy sector could continue to weigh over the core orders. Still, a modest rebound is expected by the markets.

EU macro data due today-

EUR German IFO Expectations (JUL) - expected 101.8, previous 102.00

The expectations index could provide a positive surprise to the EUR as the Greek crisis is out the way. However, a weak print could make it difficult for the pair to maintain the bullish tone ahead of the durable goods report.

Technicals – Rising channel on the hourly chart

The spot currently trades just above 1.10 handle. The EUR managed to recover above 1.0964 (50% of Mar-May rally) on Friday, and thus, extended gains to trade above 1.10 handle today. Further gains are seen only in case of an hourly close above the resistance at 1.1020. In such a case, the spot could rise to 1.1053 (61.8% of May-June rally). Meanwhile, a failure to take out 1.1020 could see the spot fall back to 1.0964. The bearish view would strengthen further in case the spot drops below the rising channel support at currently seen at 1.0950.