GBP/USD Forecast: Bears to make a comeback

The GBP/USD pair rose to an intraday high of 1.5690 on Wednesday ahead of the FOMC statement, before end lower at 1.5596. The US dollar was firmer against most currencies, except Sterling and Swiss franc ahead of the FOMC event.

FOMC: "Almost But Not Quite There"

The reaction to the FOMC statement was largely muted across various asset classes. The Fed sounded upbeat on the economy but left a little clue on whether it will raise interest rate in September. However, Fed did provide a jobs clue - some more improvement in the labor market before rates move, which means they are almost there but not quite. However, the jobs clue has not had any major impact on the rate hike expectations. After the release, markets are still expecting a 50/50 chance of a rate hike in September. The last leg up in the US could still be pending and may happen once the Fed provides a hint to the market in its statements through language change ahead of tightening cycle as it did in June 2004 and in June 1999. Focus now shifts to Q2 GDP and weekly jobless claims from US to be released later today.

Technicals – Fails to close above 1.5639

For yet another time, the spot clocked an intraday high above 1.5639 (38.2% of June rally), but erased gains and closed under the same. The bearish pin bar candle formed on the daily is likely to be followed by a bearish move today towards 1.5545 (50-DMA). The sell-off could extend beyond 1.5545 especially if the spot witnesses another failed attempt to take out 1.5639 in the early European session. A break below 1.5545 shall open doors for 1.55 and 1.5460 (61.8% of June rally). Only a daily close above 1.5639 could strengthen the GBP bulls.

EUR/USD Analysis: Bulls losing grip

The EUR/USD pair rose to an intraday high of 1.0834, before ending the day lower at 1.0979. The shared currency came under pressure after the FOMC statement showed policymakers need only “some more” improvement in the labor market before initiating a rate hike. The jobs clue provided by the fed pushed the EUR/USD pair below 1.10 handle.

Focus on German CPI and US GDP

German CPI (preliminary July) YoY: expected 0.3%, previous 0.3%

US Q2 GDP (preliminary) YoY: expected 2.5%, previous -0.2%

The EUR is under the threat of a further collapse today if the German CPI prints lower than expected. With the recent fall in energy prices, the CPI could provide a downside surprise. Furthermore, the US GDP is seen rebounding 2.5%, from the previous quarter’s 0.2% contraction. A GDP print at or above 2.5% could be enough to drive the EUR/USD pair below the critical support at 1.0964 (50% of Mar-May rally).

Meanwhile, Greece is not out of the woods yet. Reuters reported earlier Greek PM Alexis Tsipras, struggling to contain a revolt in his left-wing Syriza party, said on Wednesday that his government would not implement reform measures beyond those agreed with lenders at a euro zone summit this month.

Technicals – bearish below 1.0964

The spot breached the rising channel seen on hourly chart on the downside, but found support at 1.0964 (50% of Mar-May rally). Prices are also back below the falling trend line on the hourly chart (Jun 22 – Jul 10). At the moment, the hourly 200-MA at 1.0968 is offering a strong support to the EUR. Consequently, a minor jump to 1.10 cannot be ruled out. However, fresh offers could hit the pair around the same, opening doors for a break below 1.0964, under which the spot could extend losses to 1.0924 (July 24 low).