The GBP/USD pair took out May 2010 low of 1.4227 and took out 1.42 levels to hit a low of 1.4130; its lowest level since February 2009. Sterling rose as high as 1.4339 but ran into offers once again near the 5-DMA. The better-than-expected core CPI helped Sterling but Carney’s dovish take on interest rate triggered a sharp fall to fresh multi-year lows.
“Now is not the right time to raise rates”, Carney said and this is something the majority in the markets already knew. Till yesterday, many believed the rate hike may happen sooner-than-expected. The interest rate futures were pointing to a full 25 basis points move in Fed 2017, while many believed a hike would happen in second half of 2016. The drop in the cable following Carney’s comments indicates those expecting a rate hike in H2 2016 now pricing-in a delay.
Eyes UK Wage data
Mark Carney stressed moderating wages in his speech yesterday. This is of particular importance as the monthly UK labor and wage data is due for release today. The jobless claims may receive little attention from the markets unless the number is surprisingly positive. Meanwhile, wage growth is expected to slow significantly and that would single handedly push the GBP/USD pair down to 1.40 handle.
Technicals – Falling channel intact on 4-hr chart
The sell-off in the pair stalled at the falling channel support in the NY session yesterday.
The RSI stays oversold on the daily and intraday time frames.
Hence, a possibility of technical correction cannot be ruled out. However, the upside is likely to be capped around 5-DMA seen today at 1.4293.
Strong support is seen at 1.4116 (falling channel support). A break below the same would open doors for a slide to 1.40 handle.
EUR/USD Analysis: Will it tests 200-DMA
The EUR/USD rose to 1.0937 before falling to an intraday low of 1.0859 on the back of the rally in the Asian and European stocks. The pair managed to recover losses due to a sharp rally in the EUR/GBP pair and close moderately higher on the day at 1.0907 levels.
The Eurozone economic calendar is empty; hence the currency could head higher if European stocks follow Asian equities lower. The currency pair could test 200-DMA at 1.1048 if the European equities drop and the US equities follow them lower.
Technicals – Eyes 200-DMA
Euro’s close above the falling channel on the daily chart, followed by a move above 1.0940 (61.8% of Mar-Aug rally) in Asia indicates the currency could be heading towards 100-DMA at 1.1002.
A break above 100-DMA would open doors for a rally to 1.1048 (200-DMA).
On the lower side, a failure to sustain above 1.0940 (61.8% of Mar-Aug rally) could send the pair back to 1.0890 (38.2% of 1.1495-1.0517).
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