The GBP/USD pair recovered from the low of 1.5178 levels seen earlier today in the Asian session as the USD extended its previous session’s rally on the back of a better-than-expected US ISM manufacturing data. However, the USD ran into offers in the early European session today, thereby pushing the pair above 1.52 levels. The gains were extended further to 1.5230 after the UK construction PMI in May beat estimates to rise to 55.9.
On the charts, we see the pair bounced from 1.5189 (50% Fib R of 1.4564-1.5813), although gains are being capped at the 50-DMA located at 1.5228. On the upside, a break above 1.5235 could drive the pair higher to 1.5260-1.5266. As pointed out in the previous session, the short-term outlook would turn bearish once the pair breaks above hourly 50-MA located at 1.5266, opening doors for 1.53-1.5310 levels. On the downside, another failure to take out the hourly 100-MA could result in a fresh sell-off to 1.5189. Given the bounce back from 50% Fib, the pair could provide a break above 1.5266 today.
EUR/USD Forecast: Gains capped at 1.10?
The EUR/USD pair currently trades at 1.0977 levels after being rejected twice since the Asian session at 1.0991 levels. The pair recovered from the low of 1.0916 levels, tracking the sharp rise in the benchmark 10-year German yield. In the previous session too, the pair managed to hold above 1.09 levels despite the strong US manufacturing data mainly due to the rise in the German yields.
The 10-year yield in Germany currently trades 8.1 basis points to 0.612%. The Eurozone CPI on an annual basis rose for the first time in six months in May, printing higher than expected at 0.3%. Core inflation also ticked higher to 0.9% from 0.6%. Still, the pair was offered once again at 1.0991 levels. The failure at 1.0991 post upbeat CPI data tell us that the resistance at 1.10 is likely to remain in place for a longer time.
On the hourly charts, we clearly see the pair made a double bottom at 1.0888 (61.8% Fib R of 1.0817-1.1004). Consequently, the pair extended gains today to a high of 1.0991. However, we also see a double top on intraday charts at 1.0991, which increases the probability of the pair once again dropping below 1.0971 (23.6% Fib R of 1.0817-1.1004) and 1.0963 (50% Fib R of 1.0461-1.1465). A break below 1.0963-1.0961 could push the pair down to 1.0932. On the upside, only an hourly close above 1.10 levels could bring in fresh bids and take the pair higher to 1.1081 (38.2% Fib R of 1.0461-1.1465).
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