The GBP/USD pair fell to an intraday low of 1.5113 on Friday on a weaker-than-expected UK manufacturing PMI. The PMI fell to 51.9 in April from 54. Mortgage approvals also dropped to 61.3k from 61.5k. The onus now falls on UK’s services PMI report, due for release this week, to show that the economic slowdown is not as sharp as indicated by the manufacturing activity. In case, the services PMI is weak, the GBP/USD pair could drop to 1.5. As for today, no major data is due for release out of the UK. However, the pair could remain under pressure ahead of May. 7 elections. Reuters reported earlier today British PM David Cameron's Conservative Party took a one-point lead over the opposition Labour Party.
At the moment, the pair is trading at 1.5150, after having bounced-off from the 38.2% Fib support of 1.4564-1.5490 located at 1.5136. The sharp sell-off on Friday pushed the intraday RSI indicator to oversold region, thus helping the pair recover slightly to 1.5163 from the low of 1.5113. Fresh offers could be seen so long as the pair trades below its hourly 200-MA located at 1.5166. A break below 1.5113 could exposes 1.5087 (50-DMA) and 1.5027 (50% Fib retracement of 1.4564-1.5490). On the upside, area around 1.5120 (+20pips/-20pips) is likely to act as a strong resistance. Rejection at the same could trigger a fresh sell-off to 1.5027 levels.
EUR/USD Analysis: Could extend the drop to 1.1124
The EUR/USD pair ran into offers around 1.1278 levels for the second consecutive session on Friday, as the US dollar rallied across the board despite softer than anticipated manufacturing ISM and University of Michigan consumer sentiment reports. The dollar recovery begun on Thursday after the jobless claims printed at a 15-year low. Meanwhile, the Germna and the Eurozone manufacturing PMI reports are due for release today. A weak print could drive the pair lower to 1.1120-1.1130 levels since it would underscore the fact that the ECB’s current QE program is failing to have a desired impact. A slight support could come from the possible rally in the EUR/GBP pair on account of the election uncertainty in the UK.
The pair currently trades at 1.1191, with the daily RSI having turned lower from the overbought region. The rejection faced around 1.1278 indicates a temporary top could have been made, which shifts risk in favor of a decline towards 1.1120-1.1130 levels. However, the sell-off could resume once the pair breaks below its 5-DMA located at 1.1181. On the upside, a break above 1.1201 (hourly 200-MA) could lead to a minor rally to 1.1250-1.1270. However, the EUR is likely to be offered on rallies, until we see a daily close above 1.1278.
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