GBP/USD Forecast: Breaches 23.6% Fib support, ahead of BOE minutes

The GBP/USD fell to an intraday low of 1.5445 on Tuesday after the UK CPI in April printed below zero level for the first time since 1960. The CPI figure was in line with the BOE’s quarterly inflation report released last week, which had stated the possibility of inflation falling below zero levels. Month-on-month headline figure, core inflation all pointed to a slowdown in the price pressures. The losses were extended further in the North American session after the data in the US showed housing starts and building permits at multi year highs.

As for today, the focus is likely to be on the BOE minutes and later on the Fed minutes. The BOE minutes are likely to show all policy makers remained in favor of maintaining the interest rates at record lows. Moreover, the BOE minutes are likely to echo similar sentiments that were echoed by the BOE inflation report last week.

The pair currently trades at 1.5504; below the 23.6% Fib retrac. of 1.4564-1.5813 at 1.5519, after having ended below the same in the previous session. The pair also ended the previous session well below the 38.2% Fib retracement of the larger downtrend from 1.7190-1.4564 at 1.5568. An attempt to take out 1.5519 failed today, consequently, we may see the pair dip towards its 200-DMA located at 1.5420. On the upside, a break above 1.5519 could shift risk in favor of further upside to 1.5568.

EUR/USD Analysis: “Accelerated QE” priced-in?

EUR/USD dropped to an intraday low of 1.1117 on Tuesday, as the European Central Bank’s Benoit Coeure said that they could step up their purchases of Eurozone government bonds. What it means is the bank would purchase more than EUR 60 billion bonds in May and June, in order to avoid the seasonal issues that arise in the following months. Coeure also said the ECB may push interest rates further below zero when setting stimulatory monetary policy. As for today, again the focus is likely to on the German-US yield spread. The investors shall also keep an eye on the German yields and periphery nation’s bond yields. A rise in the periphery yields and a relative weakness in the German yields could weigh over the Euro. However, the reports were doing the rounds yesterday that the ECB and EFSF shall not cut liquidity assistance to Greece. Consequently, the EUR may find respite today.

The pair could rise back to 1.1242 (23.6% Fib retracement of 1.0520-1.1464), as it is likely to find fresh bids above 1.1104 (38.2% Fib retracement of 1.0520-1.1464). Only a fresh attempt at 1.1293 and a rejection could mean the near-term top is made at 1.1467. On the downside, a break below 1.1040 could see the pair extend losses to 1.1050 (March. 26 high). However, as said earlier, the markets seem to have priced-in the front loading of QE, hence, fresh bids in the range of 1.11-1.1150 could push the pair back to 1.1242-1.1293 levels.