The GBP/USD pair fell to a low of 1.5066 before trimming losses to end the day at 1.5101 levels. The liquidity was thin on account of the trading holiday in the US and en empty economic calendar. The focus today is on the second estimate of the UK Q3 GDP figure. The economic calendar in the US is once again empty and thus liquidity may drop in the US session.
Focus on UK GDP
The GDP figure comes two days after the UK Office for Budget Responsibility (OBR), in its autumn statement, revised its 2016 UK GDP forecast higher; courtesy of which, the Sterling has been able to halt its losing streak and sustain above 1.5087 (61.8% of Apr-Jun rally). It is quite clear then that the pair is on a relatively positive footing now than it was two days ago.
The second estimate is expected to keep the growth rate unrevised at 0.5% q/q and 2.3% y/y. Any upward revision of the GDP is likely to be well received by the markets and could see the pair re-test 1.5248 (50% of Apr-Jun rally). On the other hand, a downward revision would undo the positive impact of the OBR’s forecast and send the pair lower to the channel support (daily chart) at 1.4990-1.4980.
The GDP could turn out to be a non-event if it matches the estimates. In this case, the technical factors could dominate trading decisions ahead of the weekend.
Technicals – Symmetrical triangle on hourly chart
Sterling’s repeated refusal to stay below 1.5087 (50% of Apr-Jun rally), along with a higher lows formation – 1.5053 (Nov 24 low), 1.5056 (Nov 25 low) and 1.5066 (Nov 27 low) indicates the spot is likely to break above 1.5136 today. However, we also see a small symmetrical triangle formation on the hourly chart and thus immediate resistance is seen at 1.5120, which is also the 23.6% of 1.5336-1.5053. A break above would expose 1.5161 (38.2% of 1.5336-1.5053). On the other hand, a failure to sustain above 1.5070 (triangle support) would open doors for a drop to 1.50 levels.
EUR/USD Analysis: Indecisiveness continues
The EUR/USD pair has spent the entire week hinting at indecisiveness in the markets. The action has been restricted to a narrow range of 1.0590-1.0670, except on Wednesday when the pair clocked a high of 1.0689 and a low of 1.0566 before moving back above 1.06. On Thursday, the pair traded lacklustre, but managed to stay above 1.06 handle despite the rally in the European stocks. With no major data due out of the Eurozone and the US, the pair is at the mercy of the equity markets.
Technicals – Another bullish RSI divergence on the hourly chart
The hourly chart clearly shows a bullish RSI divergence. The daily chart also shows lower lows on price accompanied by higher lows on RSI. The hourly RSI is now above 50.00. The Dragonfly Doji on Monday, spinning bottom on Tuesday and Wednesday indicate indecisiveness near the bottom of the latest fall. All factors are pointing to a pending technical correction to 1.0758 (76.4% of Mar-Aug rally). Immediate resistance at 1.0674 (Nov 10 low) could be breached without much struggle. On the other hand, a failure to push through 1.0674 could open doors for a re-test of 1.0566 (Wednesday’s low).
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