GBP/USD Forecast: Above 1.53, bulls remain in control, eyes UK core inflation

The GBP/USD pair ran into offers as it moved closer to Friday’s high, but managed to close at 1.5346 levels. The Bank of England’s (BOE) Weale talked about the UK productivity, but refrained from making any specific comments regarding the monetary policy. Meanwhile, fed officials once again made an effort to talk up the 2015 rate hike bets. But, again markets hardly responded. Moreover, even the voting members of the Fed are unable to agree on the timing of the liftoff. The pair fell to a low of 1.53 in Asia today, before recovering slightly to trade around its 200-DMA located at 1.5319.

Focus on UK core CPI

The UK core CPI for September is seen ticking higher to 1.1% from Aug’s 1.0%. Meanwhile, the headline figure is seen unchanged at 0.0% on an annualised and monthly basis. The headline figure will not come into play so long as the number is not horribly negative. A minor drop could shave off few pips from the GBP/USD pair, but if the core ticks higher, the pair is likely to take back losses and move towards 50-DMA located at 1.5410. Meanwhile, a drop in the core inflation figure, along with a weak headline figure could push the pair below 1.53.

Technicals – Eyes 50-DMA at 1.5410

Sterling’s once again found support at 1.53 (23.6% of 1.5930-1.5107) in Asia today, which was followed by a rise to its 200-DMA at 1.5318. The pair has been largely stuck in a range if 1.53-1.5380 since last three trading sessions. The action witnessed today in Asia indicates the range could be pierced on the upside. The spot appears on track to chew through offers at 1.5380 to test its 50-DMA located at 1.5410 levels. On the lower side, an hourly close below 1.53 could open doors for a sell-off to 1.5248 (50% of Apr-Jun rally).

EUR/USD Analysis: Bullish above 1.1322

The EUR/USD pair rose to an intraday high of 1.14 levels on Monday, but was pushed back in the NY session leading to a daily close at 1.1357 levels. The EUR reportedly received a boost from the ECB President Mario Draghi’s upbeat comments over the weekend. The Bundesbank President Weidmann was also on the wires agreeing with Draghi about the downside risks to the Eurozone economy, but stated that the outlook is not as weak as widely perceived by the markets.

German Zew Survey could hurt the EUR

The German Zew survey indices – current situation, economic sentiment – are likely to highlight the problems in the Eurozone’s strongest economy. Off late the German economic numbers have been disappointing. However, policymakers have repeatedly played down the possibility of the German slowdown. A weak Zew survey is likely to weigh on the EUR. However, the possible losses in the European equities could put a floor under the pair around 1.1322 levels.

China’s imports tanked more than expected, the data released today showed and this is a significant risk to the Eurozone exports. Consequently, weak exporter shares and oil and mining shares could push the major European equity indices lower and offer support to the EUR.

Technicals – Re-test of 1.14

Euro’s minor losses on Monday, followed by a recovery from the low of 1.1344 in Asia today indicates the bulls remain in control above 1.1322 and the spot is likely to re-test 1.14 levels ahead in the day. A break above 1.14 would expose 1.1460 (Sep 18 high). On the downside, only a daily close below 1.1322 (Green trendline support) would mean the bulls have lost control and the pair may fall backwards to test the falling trendline (black) support currently seen at 1.1220 levels.