The GBP/USD pair opened lower at 1.5549 after a ‘No’ vote in Greek referendum sharply raised the prospect of Grexit. The resulting demand for the safe haven US Treasuries strenghthened the US dollar. A minor recovery is being witnessed ahead of the European morning, with pair struggling to rise above 1.5568 (38.2% R of July 2014-April 2015 plunge). With no major UK data scheduled for release today, the pair is at the mercy of the overall market sentiment.
Fresh offers could be witnessed in the early European session in response to Sunday’s referendum result. The risk aversion may not be severe as the European bigwigs are expected to be on wires, calming market nerves by verbal assurances. Ahead in the US session, the pair could be influenced by the US services PMI figures.
On the daily chart, the pair is struggling to take out the 50-DMA resistance at 1.5566 and 1.5568 (38.25 Fib R of July 2014-April 2015 plunge). The daily close on Friday (at 1.5588) was bearish; below 1.5606 (23.6% Fib R of Apr-June rally). The daily RSI has also turned bearish. However, the pair is being supported by 200-MA on the 4-hour at 1.5545 and 50% Fib R of June rally at 1.5550. A repeated failure to take out 1.5566-1.5568 could push the pair below 1.5545 and open doors for a drop to 1.5461 (61.8% Fib R of June rally). On the higher side, a break above 1.5568 could see the pair re-test 1.56-1.5638; although such a rally could see fresh selling pressure as the outlook stays bearish so long as the pair fails to close above 1.5638.
EUR/USD Analysis: Bearish below 1.0994
The EUR/USD pair opened lower on Monday after a ‘No’ vote in Greek referendum sharply raised the prospect of Grexit. The pair fell to a low of 1.0969 following Greek 'No' vote, but recovered above 1.10 levels ahead of the European morning. France and Germany have called for an emergency summit of euro zone leaders to discuss the Greece's stunning referendum vote on Sunday to reject bailout term.
With no major European data due for release, the attention would be entirely on how things unfold between Greece and its international creditors after Sunday’s ‘No’ vote. The volatility is likely to remain high as the Eurozone bigwigs are expected to be on wires in order to calm market nerves with verbal assurances. The most important piece of assurance could be heard from the European central Bank (ECB) members, who are likely to indicate readiness to do more (QE) if the Grexit situation worsens. The initial reaction to such statement could be Euro positive, however, the pair could be sold eventually. Meanwhile, a tough stance from Germany and EU could push the pair well below 1.09. At the current juncture, a new deal with a new government or Grexit appear as the most likely scenarios. A talk of deal with the new government could trigger a minor rally, but Grexit talks would be highly euro bearish.
On the daily charts, the pair has bounced-off from 1.0994 (50% Fib R of Apr-May rally) to trade above the 100-DMA at 1.1013. The daily RSI has turned bearish, while the weekly RSI also stays bearish after struggling for the couple of weeks to rise above the mid line at 50.00. The recovery could extend upto 1.1083 (38.2% Fib R of Mar to May rally). However, the bearish view remains intact as the pair breached rising trend line resistance on the daily. Consequently, the pair could be offered on the rise below 1.1083. On the other hand, a break below 1.0994 (50% Fib R of Apr-May rally) could push the spot lower to 1.0955-1.09.
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