GBP/USD Forecast: poised for recovery from Fibo support?

The GBP/USD pair fell to a multi-year low of 1.4352 levels on Tuesday and ended around 1.44 levels on Wednesday as the technical recovery ran out of steam at 1.4476 levels. The British Pound has been hammered since mid-December as markets came to terms with the falling prospects of the BOE rate hike in 2016. The losing streak has been so severe since 14th Dec that the cable closed higher on just three trading days.

Eyes BOE rate decision and minutes

The bank is widely expected to keep the interest rates unchanged. It is widely known by now that the economy and inflation in the UK is heading lower. The surprisingly weak UK November industrial and manufacturing production numbers released on Tuesday only added to the evidence of the slowdown in the activity. More importantly, slowdown in the wage growth is a bigger concern and that is likely to see the BOE keep rates unchanged.

A hawkish development would be a 7-2 interest rate vote count and that could trigger a recovery above 1.4460 (support of the trend line drawn from July 2013 low – April 2015 low). On the other hand, a 9-0 dovish surprise could push the pair lower to 1.4227 (May 2010 low).

Technicals - Strong support at 1.4372

Sterling’s failure to sustain above the resistance at 1.4460 (trend line drawn from July 2013 low – April 2015 low) and a bearish break from the symmetrical triangle on the hourly chart indicates the pair could re-test 1.4352 (Tuesday’s low). However, the oversold nature of the RSI on the daily and 4-hour chart could trigger a recovery later in the day. A rebound from 1.4372 (76.4% of Jan 2009 low-July 2014 high) could see the pair close above 1.4460 levels today.

EUR/USD – ECB minutes unlikely to jawbone EUR

The EUR/USD pair bounced off the 50-DMA support at 1.0813 to end with moderate gains at 1.0877 levels on Wednesday. This was the third time in last four days that the currency pair found fresh bids around the 50-DMA support.

Eyes ECB minutes

The ECB accounts/minutes of the December rate decision are scheduled for release today. The minutes are likely to express concerns regarding the low inflation and express readiness to do more. However, both the things are well known to the markets and hence are unlikely to have any impact on the EUR. Moreover, the recent commentary from the ECB members – low rates could trigger bubbles - has been somewhat hawkish.

Meanwhile, a bullish break in the EUR/GBP daily chart also indicates increased odds of a bullish move in the EUR/USD pair.The chart shows an inverted head and shoulder breakout has been confirmed and the pair could be heading towards 0.80 levels. The immediate resistance is seen at 0.7592 (Feb 3, 2015 high). The bullish break may be an indication of – further slide in the GBP/USD or a sharp uptick in the EUR/USD pair. Give, the cable is oversold, it is likely that the EUR/USD pair is poised to see a bullish break on charts.

Technicals – moving in a falling channel

Euro’s repeated rebound from the strong support of 50-DMA this week has increased odds of a bullish break from the falling channel seen on the daily chart. The channel resistance is seen at 1.0916. A daily close above the same would mean the uptrend from the December low of 1.0517 has resumed. The pair could target 1.1060-1.1070 (resistance of the rising trend line drawn from March low-April low). On the other hand, a failure to take out 1.0916 could see the pair revisit the 50-DMA support seen at 1.0813. A daily close below 1.0813 would open doors for a drop to the channel support seen at 1.0650.

EUR/GBP – Inverted head and shoulder breakout