The GBP/USD pair ended slightly higher on Tuesday on the back of a better-than-expected UK trade deficit data and a favorable UK-US 10-year yield spread. A strong intraday 100-pip recovery was seen in the Nort American session on comments from UK foreign secretary Hammond that there is no way the UK would become a part of currency union.
The pair rose to a high of 1.5431 in the Asian session today after BOJ’s Kuroda’s comments about little scope for further weakness in the Yen REER triggered a broad based USD sell-off. Ahead in the day, we have the UK industrial production due for release. The data is expected to show a slowdown in the activity in April. month-on-month figure is seen at 0.1%, prev 0.5%, while year-on-year is seen at 0.4% from 1.1%. However, the election uncertainty in April may be behind the weak expectations. Consequently, the markets may not pay much attention to the weak number until and unless it shows outright drop in negative territory. Thus, GBP/USD is unlikely to feel a significant heat from a weak data. However, in such a case more time would be spend to take out 1.5439-1.5450. Meanwhile, there is always a possibility of a positive surprise in the form of a better-than-expected GDP data, thereby leading to a quickfire rally towards 1.5490.
On the charts, we see the pair recovered smartly in the previous session above 1.5336 (38.2% Fib R of 1.4564-1.5813) and its 200-MA located at 1.5356. The pair also managed to score a daily close above the said levels, thereby opening doors for 1.5439 (June. 4 high). The pair has also taken out the falling trend line resistance on the daily chart in the Asian session today. Given the sharp rebound above key levels in the previous session, the pair is likely to extend gains to 1.5490 today. On the other hand, a fresh failure to take out 1.5439 could push the pair back to 1.5356 (200-DMA). The short-term outlook stays bullish so long as the pair trades above 200-DMA.
EUR/USD Analysis: Sell on Rise?
The shared currency witnessed another volatile session, as the EUR/USD pair printed an intraday high and low of 1.1344 and 1.1212 before finishing the day at 1.1291 levels. The markets ignored the US-German 10-year Bund yield spread, which narrowed to 148 basis points from 152 basis points seen on Monday. The technical factors appeared to overshadow fundamental ones, as the pair ran into offers below 1.1293 (23.6% Fib R of 1.3991-1.0461).
Given the absence of a major market moving data release in the Eurozone today, the EUR/USD pair is likely to be influenced by the movement in the EUR/GBP cross, markets appetite for the US dollars and the US-German 10-year yield spread.
The pair once again failed to score a daily close above 1.1293 (23.6% Fib R of 1.3991-1.0461) on Tuesday. At the moment, the spot is trading at 1.1330 with the daily RSI indicating more upside to come. A rise to 1.1378 could be seen in case the pair manages to take out offers in the range of 1.1344-1.1350. On the flip side, a failure to sustain above 1.1293 could see the pair target 1.1228 levels. Given the repeated failure to see a daily close above 1.1293, the pair is likely to be offered on rise.
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