GBP/USD Forecast: EUR/GBP selling could support the pair

The Monday morning begins on a sour note as Greek crisis saw the GBP/USD pair drop to an Asian session low of 1.5662, before recovering back to 1.57-1.5710 band. The sharp all was triggered by a rise in demand for the safe haven US treasuries. At one point, the 10-year yield in the US was down almost 20 basis points. The yield currently trades 17 basis points lower at 2.301%. The safe haven demand was triggered Greek prime minister Alexis Tsipras called for a referendum on July 5 over the weekend to decide whether to accept the bailout package by the international creditors.

Consequently, the cable is mimicking the moves in the EUR/USD pair. However, the drop is relatively restricted due to the sell-off in the EUR/GBP cross, which took out this year low of 0.7013 and hit a low at 0.6985. The UK consumer credit, mortgage approvals, and M4 money supply figures due today are likely to be overshadowed by the Greece-led risk aversion in the markets.

On the 4-hour chart, a repeated struggle to take out the resistance at 1.5749 (23.6% Fib R of 1.5169-1.5928) pushed the pair lower to 1.57 levels. Given the Greek crisis, the European desks are likely to offer the GBP in the early European session. In case, the pair manages to take support around 1.5660-1.5650 and move back above 1.57, then the resistance at 1.5749 could be put to test later in the day. On the downside, a break below 1.5638 (38.2% Fib R of 1.5169-1.5928) could open doors for 1.5580 levels.

EUR/USD: Hit by Greece led risk aversion, bearish below 1.1050

The EUR/USD pair opened sharply lower on Monday and extended the losses to hit a session low of 1.0953 on a string of Greece related news that triggered risk aversion.

EUR bearish Greece news

• Greek prime minister Alexis Tsipras called for a referendum on July 5 over the weekend to decide whether to accept the bailout package by the international creditors.

• ECB froze the Emergency Liquidity Assistance to Greek bank

• Greece then announced that banks will be closed today to prevent collapse in the banking system as depositors would rush to withdraw their money

• Credit controls are imposed. Only a daily limit of EUR 60 is allowed from the cash machines

The risk aversion triggered a flight to safety – Japanese Yen, Swiss Franc, Treasuries, and Gold. The 10-year Treasury yield fell almost 20 basis points in Asian session alone. The safe haven trades may get a boost once the European desks join the party. Consequently, we are likely to see the EUR bearish trade – Rising periphery yields and Falling German yields – in the early European session.

The preliminary Eurozone CPI figures due for release today are likely to be overshadowed by Greece related news flow. If anything, a slowdown in the price pressures would only add to the bearish pressure on the EUR. However, an uptick could be ignored by the markets in the wake of Greek crisis.

At the moment, the pair is trading around 1.1010 after having recovered from the low of 1.0953. As said earlier, fresh offers from the European desks are likely to hit the markets. In case, the pair manages to hold above 1.0953 and recovers back above 1.10, then the pair could take out its 100-DMA at 1.1050 and test 1.111 -1.1148 (50-DMA) levels. On the other hand, a break below 1.0953 could open doors for a sell-off to 1.0818 (May 27 low). The intraday outlook could turn bullish only above the 100-DMA located at 1.1050.