GBP/USD Forecast – re-test of 23.6% Fib resistance likely

The GBP/USD pair was rejected at 1.58-1.5805 levels on Wednesday after which it fell to an intraday low of 1.5666 before closing the day at 1.5703. The pair ran into offers at 1.58 after the release of the UK mortgage data, which showed an increase up to 42.5K slightly below expectations of a 43.1K rise. The losses were extended to an intraday low of 1.5666 in the North American session due to renewed Grexit fears. The US final first quarter GDP printed in line with the expectations, and thus turned out to be a non-event for the markets.

With no major first tier economic data due out of the UK today, the cable is at the mercy of the Greece deal news and the movement in the EUR/GBP pair. In the US session, the personal spending and income report could affect market’s appetite for the US dollars. In April, the personal spending had stalled, thereby pushing the savings rate higher. Despite low energy prices and healthy job additions personal spending (consumption) have been disappointed. Markets are expecting a rise of 0.7% in personal spending in May, while income is seen rising 0.5%. A strong spending number would cement September rate hike expectations and could lead to broad based USD rally.

At the moment, the pair is trading in the narrow band of 1.5690-1.57. The spot closed below 1.5749 (23.6% Fib R of 1.5169-1.5928), its second consecutive bearish daily close, after having faced rejection at 1.58 levels. However, the pair appears to have stabilized around 1.5688 (May 22 high) – 1.5698 (May 21 high). Thus, a break above 1.57 is likely, leading the pair higher to 1.5742 (hourly 200-MA), and 1.5749 (23.6% Fib R of 1.5169-1.5928). On the downside, a break below 1.5666 could see the pair drop to 1.5637 (38.2% Fib R of 1.5169-1.5928).

EUR/USD: Sell-off in stocks could support EUR, bearish below 1.1178

The single currency stabilised on Wednesday as concerns mounted over whether Greece and its creditors can reach a bailout agreement. The EUR/USD pair had witnessed a sharp sell-off on Tuesday as the equity markets rallied on hopes of Greek deal, leading to a decline in the funding currencies. However, renewed Greek concerns on Wednesday, weighed over the stocks and supported the EUR. The pair rallied to a high of 1.1235 on Wednesday before dropping to 1.1167 in the NY session, but ended the day at 1.1204.

With no major data due out of the EU, the Greek concerns are likely to hog the limelight. In brief the current situation with Greece is that they have tabled proposals they think are good enough for a deal and the IMF is not accepting them. Rumours, official updates and comments about the same are likely to drive the financial markets in the European session today. Ahead in the US session, an upbeat personal spending report could push the pair below critical support at 1.1180.

At the moment, the pair is trading at 1.1205 after having clocked a high of 1.1218. The spot is flirting with 1.1204 (23.6% Fib R of 1.1434-1.1133), after having recovered above 1.1178 (161.8% Fib E of 1.1434-1.1291-1.1409) and 1.1195 (150% Fib E of 1.1434-1.1291-1.1409) in the previous session. The spot also closed above its 50-DMA at 1.1192. With signs of weakness in the equities, the pair is likely to sustain above the critical support levels mentioned above. Thus, we could see the pair rise to 1.1248 (38.2% Fib R of 1.1434-1.1133) in the European session, a break above the same could open doors for 1.1266 (100% Fib E of 1.1434-1.1291-1.1409). On the other hand, a break below 1.1178 (161.8% Fib E of 1.1434-1.1291-1.1409) could push the pair down to 1.1133 levels.