GBP/USD steadies near 1.2700 handle; services PMI in spotlight

Haresh Menghani FXStreet

At the start of a new trading week, the Euro took a big knock and plunged to 1.0500 psychological mark, its lowest level since March 2015, after Italian voters rejected Prime Minister Matteo Renzi’s constitutional reforms proposal in a referendum on Sunday. The losses, however, were contained and the EUR/USD pair managed to rebound from multi-month lows as the financial markets had mostly priced-in a 'NO' vote in the referendum. The spillover effect took the GBP/USD pair to 1.2625 level before the major bounced back to 1.2700 neighborhood, still lower than nearly two-month highs touched on Friday in the aftermath of mixed US jobs data.

On Friday, the details of the official US jobs report showed big miss in the average hourly earnings growth and helped the GBP/USD pair to build on better-than-expected reading on November UK construction PMI. Other details revealed that the US economy added 178K new jobs in November, taking the unemployment rate to a nine-year low of 4.6%.

Moving ahead, ECB meeting on Thursday will be the key highlight from this week's economic docket. In the meantime, UK services PMI will be watched during European trading session for fresh impetus. Later during NA session, the US ISM non-manufacturing PMI will take the centre stage and provide further opportunities for short-term traders.

Technical outlook

GBP/USD

With short-term technical indicators moving into bullish territory, renewed strength above 1.2700 handle, marking 50% Fibonacci retracement level of 1.3439-1.1980 downslide, leading to a subsequent move above 1.2735-40 two-month high resistance, the pair seems all set to dart towards 100-day SMA resistance near 1.2800 handle before heading towards an ascending trend-channel resistance near 1.2835-40 region.

On the downside, weakness below session low support near 1.2625 level now seems to find strong support near 1.2600 handle, which if broken is likely to accelerate the slide immediately towards 38.2% Fibonacci retracement level support near 1.2535 area en-route 50-day SMA support near 1.2450 region with 1.2500 psychological mark acting as intermediate support.

EUR/USD

The pair seems to have found a temporary bottom near 1.0500 psychological mark. However, given that it has already decisively broken below a short-term ascending trend-channel formation on 4-hourly chart, any further recovery might now confront strong hurdle at the ascending trend-channel support break-point, turned resistance, near 1.0600 handle. Only a decisive move back above 1.0600 handle could assist the pair to stage additional recovery towards 1.0635 intermediate resistance ahead of 1.0665-70 strong horizontal resistance.

On the flip side, 1.0500 mark remains immediate support to defend below which the pair is likely to extend its near-term downward trajectory further towards March 2015 monthly lows support near 1.0470-60 region. A decisive break below 1.0470-60 support would now open room for continuation of the pair’s downward trajectory, possibly towards testing its next major support near 1.0155-50 zone in the near-term.

Author

Haresh Menghani

FXStreet

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

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