The GBP/USD pair rose to a intraday high of 1.4323 before falling below the opening price and ending the day moderately lower at 1.4242 levels, thereby forming an inverted hammer candlestick on the daily chart. The trading volumes were thin as the US markets were closed. The pair ticked moderately higher in Asia to trade around 1.4265 levels.
Eyes Carney speech and UK CPI data
Bank of England Governor Mark Carney will be delivering his first speech on the economy this year today. Carney is expected to pin point at the slowdown in the service sector and low inflation. By now it is well know that the slide in oil and other commodities is primarily responsible for the weak headline inflation numbers. Hence, dovish comments with regards to inflation are unlikely to trigger a drop in Sterling, especially since the currency has shed almost 1K pips in last one month. The official inflation numbers are due for release as well. A weaker-than-expected CPI and core CPI could trigger a drop in the GBP/USD pair.
Technicals – Eyes 5-DMA
The inverted hammer formation with an oversold RSI on the daily timeframe has increased the probability of a rally in the GBP/USD pair to its 5-DMA seen at 1.4351.
Pair has repeatedly run into offers as it neared its 5-MA throughout last one month. Hence, fresh offers may hit the pair if it nears or tests 5-DMA at 1.4351.
On the other hand, a break below 1.4227 (May 2010 low) could see the pair test the falling channel (seen on 4 hour chart) support of 1.4160.
EUR/USD Analysis: Eyes 50-DMA support, Asian equities stabilize
The EUR/USD pair turned lower from the intraday high of 1.0928 to end the day on a weaker note at 1.0890 levels. The common currency was again a beneficiary of the carry unwind triggered by the drop in the European stocks. However, the losses in the equities were moderate which opened doors for a drop in the EUR/USD pair in the US session.
Focus remains on stocks
Share prices rose in Asia have responded positive to Chinese data. The full-year came in at 6.9% for all of 2015, the lowest since 1990. Year-on-year GDP came in at the expected 6.8% rate. Industrial production rose 5.9%, a bit lower than the 6.0% seen and retail sales gained 11.1%, a bit lower than up 11.3% expected.
Crude oil prices are up 1% as well. Thus odds of a rise in the European stocks have increased. Hence, the EUR/USD pair could be heading lower to its 50-DMA of 1.0816 levels. The Eurozone CPI could be ignored by the markets unless the number is revised lower. Meanwhile, Zew Survey figure too could receive little or no attention unless the actual figure is significantly higher/lower than estimates.
Technicals – Breaks below Key Fibo support
Euro’s previous day’s closing below the falling channel support followed by a break 1.0890 (38.2% of 1.1495-1.0517) indicates the pair is likely to test the 50-DMA support of 1.0816 levels today.
Meanwhile, a failure to break below 1.0852 (38.2% of 1.0517-1.1060) could see the pair revisit 1.0930 (23.6% of 1.0517-1.1060).
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