The GBP/USD pair jumped as high as 1.4649 levels before trimming gains slightly to end the around 1.4602. The British Pound was buoyed by a better-than-expected UK services PMI, but major part of the gains were triggered by the broad based USD selling seen in the NY session. The US ADP figure highlighted slowdown in the private sector job growth. Meanwhile, the US ISM non-manufacturing also weakened more than expected and showed job losses. However, the real pain for the USD began after Fed’s Dudley expressed concerns about market and global downturn.
Dudley fired first warning shot on behalf of Fed
The risk-off in the markets that began in the early January received little/no attention from the Fed officials. On the other hand, the financial markets pushed out the rate hike bets to June, indicating that Fed and markets were not on the same page. Moreover, policymakers maintained were sure the overall outlook remained unchanged from Dec rate hike.
However, Dudley fired the first warning shot yesterday and rocked the USD bulls. His dovish comments are not surprising since the risk-off looks serious as markets even failed to sustain the BOJ led rally. Hence, the weak tone around USD may persist or strengthen further if the risk-off continues. Still, caution is advised as it is Super Thursday again. The various scenarios and their anticipated effect on Sterling could be viewed here (Macro Scan).
Technicals – Flirting with key resistance
The daily chart shows Sterling closed well above the falling channel resistance.
Plus, we also see an expanding triangle breakout on the 4-hour.
Hence, odds appear stacked against the bears, but technical are likely to take a back seat today.
Moreover, BOE/central banks can easily turn around the charts.
EUR/USD Analysis: Strong support at 1.1048
The EUR/USD pair witnessed a bullish break from the larger falling trend line (Aug High-Oct high). The pair closed at 1.1102 as the USD selling gathered pace in NY session following dovish comments from Fed’s Dudley.
Technicals – Bullish above 1.1102
Euro’s witnessed a bullish daily closing on Wednesday, but still needs to take out the long-term rising trend line resistance (March low to April low and extended) seen at 1.1102.
Pair was rejected at the same in Asia today and fell back to trade around 1.1080 levels.
A rebound from the larger falling trend line support seen at 1.1048 could see the pair take out 1.1102 levels and rise towards 1.12 levels.
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