GBP/USD Forecast: Risk-aversion could make a comeback, PMI releases in focus
|Global equity markets are seen shrugging-off all of the Brexit drama but the British Pound lost its recovery steam after BOE Governor Mark Carney hinted towards further monetary easing this summer. On Thursday, the GBP/USD pair reversed from the vicinity of 1.3500 and dropped to 1.3200 handle before recovering from lows to currently trade back above 1.3300 level. Nevertheless, the pair logged over 7% of losses during June quarter, its largest quarterly drop since the last quarter of 2008 when the pair dropped around 19%.
Meanwhile, the EUR/USD pair on Thursday also reversed its gains posted in the previous trading session after reports signaled that ECB might consider easing QE rules on concerns about shrinking pool of eligible debt. Adding to this, ratings agency S&P lowered the European Union's credit rating on Thursday from "AA+" to "AA", with a stable outlook, citing fiscal uncertainty over the UK's vote to leave the EU.
On the last trading day of the week, global risk aversion seems to make a comeback after disappointing print of the Chinese manufacturing PMI data for June. The official manufacturing PMI dropped to 50 while the Caixin manufacturing PMI dropped further into contraction territory and printed 48.6 in June. PMI data will remain in focus on Friday. Euro-zone and UK manufacturing PMI will grab attention during European trading session while US will release ISM manufacturing PMI later during NY trading session.
Technical outlook
GBP/USD
Following a decisive break below a short-term ascending trend-channel formation on H1 chart, the pair remains well anchored below flattening 50-hourly SMA. Hence, weakness back below 1.3300 round figure mark seems to drag the pair immediately towards 1.3235-30 support, below which the pair seems all set to head back towards multi-decade lows to test 1.3150 support area.
Conversely, strength above 50-hourly SMA resistance near 1.3390-95 region (nearing 1.3400 level), the pair could make an attempt to head back towards the ascending trend-channel break-point, now turned resistance, near 1.3470-75 area. Any follow through buying interest might continue to confront strong selling pressure around 1.3500 psychological mark, which now seems to cap any immediate up-move for the pair.
EUR/USD
The pair continues to hover around 200-day SMA but now seems to show signs of a possible break-down that would be confirmed once the pair sustains its weakness below 1.1070-65 support, marking 50% Fibonacci retracement level of 1.0522-1.1616 up-move. A convincing break below this immediate support now seems to pave way for a decisive break below 1.1000 psychological mark support and head towards retesting Brexit-led swing lows support near 1.0930-20 confluence region, comprising of 61.8% Fibonacci retracement level and a trend-line support, extending from Jan. through March lows.
Meanwhile on the upside, 1.1125-30 area now seems to have emerged as immediate resistance. Momentum above this immediate resistance, leading to a subseequent strength above 1.1150, could lift the pair immediately towards 38.2% Fibonacci retracement level support near 1.1200 handle. A sustained strength above 1.1200 handle now seems to negate any further bearish expectations for the pair and open room for extension of the recovery trend in the near-term.
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