GBPUSD

The GBP/USD was offered to 1.5174 in early Europe, before a minor sell-off in the EUR/GBP cross pushed the cable to 1.52. The USD was offered in early US session after Fed’s Yellen and other officials failed to provide any hawkish surprises. Consequently, the GBP/USD pair jumped to 1.5242 (hourly 200-MA) before trimming gains to 1.5210 in the Asian session today.

Another weekend USD rally ahead?

The US advance retail sales for October is due for release today. The consensus estimate is for a reading of 0.3%, compared to September’s 0.1%. Retail sales ex-Auto and Gas is seen rising 0.4% compared to 0.0% seen in September.

Liftoff – 25bps or lower than 25bps?

A weaker-than-expected data is unlikely to do much damage to the USD bulls as markets consider December lift-off as a done deal. So long as the number is positive, the debate would be whether the December liftoff would be of 25bps or less than 25bps. Retail sales printing in line with the estimates/or higher than estimate could trigger another USD rally ahead of the weekend.

In case, the retail sales unexpectedly contract, the December rate hike bets may take a hit and lead to a technical correction in the USD. At the moment, the December rate hike bets stand at 69.8%. A weak headline figure (in negative) could push the bets below 65%. Still, the December ate hike would remain a possibility and the technical correction in the USD could turn out to be an opportunity for the USD bulls to initiate fresh longs.

Technicals – Rising Channel on the hourly chart

Sterling has been moving in a rising channel on the hourly chart after having hit a low of 1.5025 last Friday. A repeated failure to take out hourly 200-MA, accompanied by a bearish hourly RSI and daily RSI could trigger a break below the channel support seen at 1.5187. That could lead the pair lower to 1.5139 (23.6% of last week’s fall).

A headline US advance retail sales figure < 0.0% could lead to a daily close above 1.5248 (50% of Apr-Jun rally). However, bulls would need a break on the hourly chart above the rising channel resistance at 1.5280.


EUR/USD Analysis: flirting with Inverted head and shoulder neckline

EURUSD

The EUR/USD pair witnessed an inverted head and shoulder breakout in the NY session after the shared currency managed to hold its own above 1.07 despite Draghi’s dovish comments in Brussels. The policy maker sounded worried about core inflation and reiterated that the central bank would reassess the need to do more easing in December.

Focus on Eurozone/German GDP

The entire focus at the moment appears to be on the growing divergence between the ECB and the Fed and the divergence is being influenced more by the US side data rather than the EZ data. An upward revision of the German and Eurozone Q3 GDP is expected, but the data may not have much of a direct impact on the EUR/USD pair. Moreover, the reaction in the European equity markets would indirectly influence the EUR/USD pair. Later in the day, a weak advance retail sales could trigger a rally in the EUR/USD pair.

Technicals – Inverted head and shoulder breakout on the hourly

Euro’s rise following an inverted head and shoulder breakout in the NY session stalled near the hourly 200-MA, followed by a fall back to the neckline support at 1.0776. Failure to sustain above 1.0776 could push the pair back to 1.07 handle. On the other hand, the pair could rise to 1.0816 (hourly 200-MA) in case the pair manages to sustain above 1.0776. A break above 1.0816 would open doors for 1.0870 (inverted head and shoulder target).

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