Broad based USD selling in the NY session on Friday helped the GBP/USD chew through offers placed around 50-DMA and rise to a high of 1.4436. A minor bout of profit taking saw the pair end the day/week at 1.4381 levels. This was the second weekly gain as the so-called ‘Brexit’ issue has taken a backseat. However, the referendum is in June and till then another round of Brexit driven sell-off could happen.
The empty data calendar in UK and US leaves the pair at the mercy of the overall market sentiment. The main event this week is the Fed rate decision (on Wednesday), which will be followed by BOE rate decision, minutes and budget statement on Thursday. Pound’s two –week rally could end if the BOE tilts towards dovish side. Moreover, ECB’s big bazooka increases pressure on its UK counterpart to stay dovish.
Technicals – At make or break level
Sterling is looking to re-enter the falling channel (black) once again, but is having a tough time taking out the resistance at 1.4878.
Previous attempt to re-enter falling channel failed in early/mid Feb following which we had Brexit sell-off.
Hence, a failure to sustain/break above 1.4878 could push the spot back to its 50-DMA of 1.4313 – 1.4284. A break lower would expose the falling trend line (red) support at 1.4250.
Unless the daily closing is below 1.4250 the odds of a break above 1.4436 remain intact.
On the higher side, only a break above Friday’s high of 1.4436 would mean continuation of the uptrend and would expose 1.45 handle.
EUR/USD Analysis: Rising trend line resistance at 1.1178
The EUR/USD pair recovered from 1.1080 on the back of a broad based USD weakness to end the week at 1.1144 levels. The data calendar is light today and traders may look through the Eurozone industrial production release if the equity markets see action. Continuation of risk-on trading could push EUR lower and vice versa.
Technicals – Rising trend line resistance intact
Euro’s closing below the rising trend line resistance at 1.1178 (drawn from Mar low-Apr low and extended) and failure to take out the same in Asia today indicates the currency pair is likely to drift lower to 1.1115 (50% of 1.1714-1.0517).
Spot could chew through bids around 1.1115 amid rising stocks and open doors for a drop to 1.1080 (Mar 11 low).
On the other side, a break above 1.1178 would expose 1.1218 (Mar 10 high). However, bulls would jump in only above 1.1218 and the could take the spot higher to 1.1257 (61.8% of 1.1714-1.0517).
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