The GBP/USD pair rose to an intraday high of 1.5237 levels in the NY session on Friday after the horrible US non-farm payrolls number pushed the 2015 Fed rate hike bets out of the window. The US economy created only 142,000 jobs in September, which is 64,000 short of the consensus estimates. The average earnings data disappointed coming in at 0.0% month-on-month. The net revision for the previous two months was down 59,000. The USD quickly suffered a broad based weakness, but managed to take back prt of its losses heading into the weekend.
Fed rate hike bets drop, trouble for BOE and Pound
At a first glance, is is easier to believe that Sterling could enjoy a broad based rally. However, drop in the Fed rate hike bets also delays the BOE’s liftoff. Also the UK economic data aren’t printing well of late. Consequently, a minor rally in the GBP/USD could be followed by a major fall.
The UK September services PMI figure due today could trigger a minor rally towards 1.5330 levels. Further gains appear difficult, especially if the markets turn risk averse in the next few days, leading to a further drop in the Fed and BOE rate hike bets. In case the services PMI disappoints, Sterling could drop to 1.5 handle.
USD to remain strong against risk currencies (despite drop in Fed rate hike bets)
What works for the USD is the safe haven appeal of the treasuries; something that the UK Gilts lack. Consequently, the USD is both a risk currency as well as a safe haven and thus, Sterling and other risk currencies (EM and Asian currencies) are in for a beating as falling rate hike bets accentuates global growth concerns and leads to risk aversion.
Thus, a relief rally (on strong UK services PMI) could easily run out of steam around 1.5330 levels.
Technicals – Rounding bottom on hourly chart
Sterling’s rebound in Asia from the crucial support at 1.5170 (Sep 1 low) after the Friday’s dismal jobs data indicate the spot could take out the rounding bottom neckline on the hourly chart seen at 1.5237 levels and rise to 1.5293 (5-WMA)-1.5330. The last week’s Doji candle also indicates that bears may have run out of steam and the spot could witness a much needed technical correction. On the downside, a failure to sustain above the hourly 200-MA at 1.5193 could lead to a fresh drop to 1.5170-1.5107 levels.
EUR/USD Analysis: Non-farm payrolls miss, ECB to do more
The EUR/USD pair spiked to 1.1318, before trimming gains to end at 1.1206 on Friday. The spike was the result of the big miss on the payrolls report discussed above. However, a fall back to 1.1206 could have taken many by surprise.
ECB to do more?
The entire move during the NY session on Friday could be an indication that farther the Fed goes from the lift-off, nearer the ECB comes to more QE. This means, that a weak US data/drop in the Fed rate hike bets could push the EUR higher; but at a slower pace than other majors like CHF and JPY. However, against risk currencies like GBP and commodity dollars, the EUR could spike especially if the risk aversion becomes more intense in the days ahead.
As for today, the EZ services PMI are due to hit the wires. An upbeat figure could open doors for a re-test of Friday’s high and beyond.
Technicals – Multiple resistance ahead
Euro’s fall back from the high of 1.1318 to 1.1206 on Friday indicates the EUR bulls are likely to have a tough time so long as the pair trades below 1.13. Heading towards 1.13, the pair faces critical resistance at 1.1271 (green line in chart) followed by 1.1296 (23.6% of larger downtrend) and 1.1310 (blue line in chart). Only a break above 1.1310 could open doors for a rise to 1.1390 (dotted line in chart). On the downside, a failure to sustain above 1.12 could push the spot back to its 200-DMA at 1.1162 levels.
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