The GBP/USD pair tracked the action in the equity markets throughout the data, while largely ignoring comments from BoE MPC member Cunliffe and a mixed UK trade deficit data.
Key take away from UK data releases yesterday
The Office for National Statistics said Britain's total trade deficit widened to GBP 10.352 billion in the fourth quarter from GBP 8.575 billion in the previous quarter, marking the biggest trade gap since the start of 2015.
Goods deficit for 2015 as a whole widened to GBP 125.028 billion from GBP 123.143 billion; the biggest on record.
In December, the total trade deficit, including services, narrowed to GBP 2.709 billion from GBP 4.031 billion.
The fourth quarter figure clearly shows trade is likely to act as a drag on the economic growth. However, markets paid little attention to the weak data.
Eyes UK manufacturing production data
The manufacturing production could have remained subdued in December, given the weaker trade data in Q4. The PMI number also showed the activity remained subdued in December. However, the weaker data may not lead to a fresh sell-off in Sterling as – the slowdown is priced-in (after PMI release & during Dec-Jan fall) and a slightly weaker-than-expected figure may have little effect on Pound. On the other hand, a positive figure could help Sterling make gains, but the upside could be restricted if the risk-off tone in the equities worsens.
Technicals – Eyes rising trend line resistance at 1.4540
Sterling’s three-day drop, followed by a positive candle and a daily close back above key level of 1.4445 indicates the bullish momentum could regain pace today and send the spot higher to 1.4516-1.4519 (23.6% of 1.5930-1.4079 + 38.2% of 1.5230-1.4079).
A break above the same would expose 1.4540 (rising trend line resistance)
On the other hand, an hourly close below 1.4420 (falling trend line support) could see the spot test 1.4360 levels.
EUR/USD Analysis: Hovers around key Fib, strong support at 1.1253
The EUR/USD pair rose to 1.1338 on the back of a heightened risk aversion in the early US session. The spot ignored lackluster German industrial production data. The bullish momentum ran out of steam and the pair fell back to trade around 1.1290 levels after the US equities regained poised and ended on a flat note. The risk-off seen in Asia ensured the pair stayed around 1.1290 levels.
Eyes Yellen testimony
Yellen is scheduled to testify on the economy before congressional committees today and tomorrow. Comments on whether the Fed will still be considering a rate hike at its March meeting is what markets would be interested in hearing. As per CME data, markets do not see the Fed moving rates in 2016. If Yellen plays down next rate hike move, then it would mean policymakers and the markets are now on the same page and thus USD could witness a sharp sell-off.
Technicals – Bearish RSI divergence on 4-hr chart
The 4-hr chart shows a bearish price RSI divergence, which warrants caution on the part of the bulls so long as the pair stays below Monday’s high of 1.1338.
A minor correction could stall around 1.1253 (100% Fibo expansion of Dec low – Dec high – Jan low)
A break lower would expose critical support at 1.1236 (38.2% of Mar low-Aug high).
On the higher side, resistance at 1.14 could be put to test if the spot takes out 1.1338.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended Content
Editors’ Picks
AUD/USD holds above 0.6500 in thin trading
The Australian Dollar managed to recover ground against its American rival after AUD/USD fell to 0.6484. The upbeat tone of Wall Street underpinned the Aussie despite broad US Dollar strength and tepid Australian data.
EUR/USD comfortable below 1.0800 lower lows at sight
The EUR/USD pair lost ground on Thursday and settled near a fresh March low of 1.0774. Strong US data and hawkish Fed speakers comments lead the way ahead of the release of the US PCE Price Index on Friday.
Gold pulls away from daily highs, holds above $2,200
Gold retreats from daily highs but holds comfortably above $2,200 in the American session on Thursday. The benchmark 10-year US Treasury bond yield stays near 4.2% after upbeat US data and makes it difficult for XAU/USD to gather further bullish momentum.
Google starts indexing Bitcoin addresses
Bitcoin address data is live on Google search results after users realized on Thursday that the tech giant started indexing Bitcoin blockchain data. However, mixed reactions have followed the tech giant's reversed stance on the cryptocurrency.
A Hollywood ending for fourth quarter GDP
The latest revisions put Q4 GDP at 3.4%, the second fastest quarterly growth rate in two years. Much of the upside was attributable to stronger consumer spending, yet fresh profits data affirmed it was a good quarter for the bottom line as well with profits up by the most since the Q2-2022.