Thursday's disappointment from the Bank of Japan's decision continued to weigh on the US Dollar (USD) on Friday. Friday's data on the US inflation as measured by the PCE index, the Fed’s preferred measure of inflation, failed to extend any support to the greenback. The core PCE index, which excludes the volatile food and energy categories, rose just 0.1% m/m in March while it was up 1.6% from March 2015 as compared to 1.7% in the previous month. The inflation data along with weak reading on US economic growth during the first quarter of 2016, continued to fuel speculations that the Fed might refrain from raising interest rates during its meeting in June, dragging USD further into negative territory.
The GDP/USD pair rose to its highest level since Feb. before retreating back to 1.4600 handle. On the other hand, the EUR/USD pair surged passed Feb. high level of 1.1465 to its highest level since Oct. mid-October 2015 on better-than-expected region's GDP data for the first quarter of 2016. Data released on Friday showed Euro-zone GDP rose 0.6% in the first quarter of 2016, which was better-than 0.4% consensus estimates and marking a pick-up from 0.3% growth recorded in the last quarter of 2015.
Today's trading moves for GBP/USD and EUR/USD pairs would be influenced by PMI data from the Euro-zone and US ISM manufacturing PMI.
Technical Outlook
GBP/USD
Although the pair continues to trade above 1.4600 handle, it seems to face difficulty in building onto its gains and break-through Feb. highs resistance near 1.4668-70 area. Hence, in order to open room for further appreciating move, the pair need to decisively clear this immediate resistance. A clear break-through above 1.4668-70 resistance, now seems to assist the pair in surpassing 1.4700 round figure mark resistance towards testing a short-term ascending trend-channel resistance near 1.4800 handle.
On the flip slide, the pair is trading close to a short-term ascending trend-channel support, currently near 1.4585 level. A convincing break below this immediate support might now trigger a short-term corrective move, initially towards 1.4540 intermediate support and eventually towards a very important support near 1.4470-75 area.
EUR/USD
The pair on Friday managed to provide a highest weekly close since May 2015, clearly indicating that the bulls are in full control. From current levels, the pair could be aiming to test Oct. 2015 high level resistance near 1.1490-92 region, which if cleared has the potential to continue boosting the pair towards Feb. 2015 highs resistance near 1.1533-35 area.
On hourly charts, RSI reading above 70 is pointing towards slightly overbought conditions, warranting a near-term consolidation or a minor pull-back towards its previous strong resistance now turned support near 1.1415-1.1400 handle. Any subsequent weakness is likely to be limited and should be bought into near 1.1335-30 support area.
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