The GBP/USD pair fell to a low of 1.5053 before recovering somewhat to end the day at 1.5076. The second estimate of the US Q3 GDP revised the growth rate higher to 2.1% as expected and thus turned out to be a non-event for the markets. Other US data sets were conveniently ignored. Mark Carney’s comments tilted a little on the dovish side and made matters worse for the Sterling bulls.
Eyes UK Autumn forecast statement
George Osborne, at the Autumn statement and spending review today, is set to announce the biggest housebuilding programme since the 1970s to end the “crisis of home ownership in our countryâ€. He is also expected to announce cuts in spending and welfare and spread cut in tax credits over the course of the next four years instead of introducing them overnight.
The markets will also eye the forward-looking statements on the UK’s economic health and the Sterling is likely to resume its downward journey if Osborne maintains a cautious tone regarding the economy.
Later today, the US durable goods orders, personal spending and income, weekly jobless claims are due. Whether the data would be able to move markets or not is discussed here (Macro Scan)
Technicals - Bear trend intact
An oversold RSI on the hourly and 4-hour chart led to a minor overnight rise in Sterling to 1.5114 levels. However the daily RSI remains below 50.00, but still above oversold territory. Thus, pair is likely to see a renewed selling pressure around the hourly 50-MA at 1.5117, leading to a break below 1.5087 (61.8% of Apr-Jun rally). Failure to sustain above 1.5087 would open doors for a drop to 1.5027-1.50 levels. On the higher side, an hourly close above hourly 50-MA could see a quick fire more to 1.5163 (Sep 4 low). Overall, the spot appears likely to end lower for the fourth consecutive session.
EUR/USD Analysis: Could revisit sub-1.06 levels
EUR/USD moved higher to 1.0673 in New York session due to broad-based short covering in euro on account of weakness in the stock markets before briefly falling back to 1.0628 following upbeat Q3 US GDP data.
With no major data due today, the EUR could track movement in the stock markets ahead of the US data due later today.
Technicals – short covering ends today?
Monday’s Dragonfly Doji was followed by a spinning bottom formation yesterday which says the traders continue to feel directionless despite a bullish candle (dragon fly) on charts on Monday. Consequently, the short covering in the EUR may end today opening doors for a fall back to 1.0592 (Monday’s low). A break lower would shift risk in favour of a re-test of yearly low of 1.0463. On the higher side, only a break above 1.07 will point to continuation of short covering, which may last till 1.0805 (23.6% of 1.1495-1.0592).
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