The GBP/USD pair recovered from the low of 1.4360 after the BOE minutes showed the policymakers still expect a gradual rate hike. However, the minutes did not hint at a specific time of the first rate hike. Also the minutes said the weak Pound may help ease disinflation. Consequently, the recovery ended at 1.4445 following which the pair fell back to end the day largely unchanged at 1.4409 levels.
Weak US retail sales could trigger recover in Cable
The pair managed to end the day above 1.4372 (76.4% of Jan 2009 low-July 2014 high) and formed a Doji on the daily charts. Hence, the odds of a technical correction are high. Consequently, a weak US retail sales figure could help the Cable close above 1.4460 levels.
The US retail sales growth is expected to have stalled in December, compared to a 0.2% rise seen in November. This is a bad news since it means the consumption remained depressed despite the festive appeal – Christmas holidays. The retail sales ex autos is seen rising 0.2%; compared to Nov’s 0.4% rise.
The US economy is already suffering from a recession in the manufacturing sector. We also have a fresh instability in the financial markets. Hence, a weaker-than-expected retail sales figure could reduce March rate hike bets and trigger a correction in the GBP/USD pair. If the data surprises markets on the positive side, the GBP/USD pair could see a break below 1.4340.
Technicals – Eyes 1.4460
Sterling’s daily close above 1.4372 (76.4% of Jan 2009 low-July 2014 high) coupled with oversold RSI indicates the currency is likely to target 1.4460 (support of the trend line drawn from July 2013 low – April 2015 low) levels today.
Ahead of 1.4460, minor resistance is seen at 1.4434 & 1.4454(trend line resistance on the hourly chart). A failure to sustain above 1.4434 would trigger a fresh sell-off to 1.4340 (channel support seen on the hourly chart).
EUR/USD Analysis: Falling channel intact, but could re-test 1.0940
The EUR/USD pair clocked a high of 1.0940 on the back of a serious risk aversion in the European equities before falling to a low of 1.0835 after the ECB minutes left the doors wide open for more deposit rate cuts in future. The uptick in the US equities also kept the EUR under pressure. The pair ended with minor losses at 1.0863 levels.
Focus on stocks and US data
The pair remains at the mercy of the action in the major European equity markets. The Asian equities dropped and the risk aversion helped the EUR/USD pair jump 20 odd pips to 1.0890. The pair could revisit 1.0940 if the risk aversion in Asia hits the European shorts.
If the European equities trade firm, the EUR/USD pair risks falling back to 1.0840-1.0830 levels ahead of the US data. In this case, it would take a horribly weak US retail sales number and risk aversion on Wall Street to push the pair back to 1.0940 levels. Meanwhile, a break below 1.0813 (50-DMA) would happen if the US retail sales surprise on the positive side and the US stocks rally.
Technicals – Bullish break still possible
Euro’s negative closing on Thursday kept the falling channel formation intact, however the odds of a bullish break still exists since –
Euro has repeatedly bounced off from the 50-DMA and thus outlook would turn bullish once the 50-DMA support is breached.
Pair has bounced off 1.0852 (38.2% Fibo of 1.0517-1.1060) in Asia
Thus, a re-test of 1.0940 could be seen. A daily close above the falling channel resistance would mean the uptrend from the December low of 1.0517 has resumed.
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