The GBP/USD pair formed a Doji candle as it fell from the high of 1.5642 to 1.5562 before finishing the day at 1.5595. The spot continued to battle with the offers above 1.5639 (38.2% fib of June rally) throughout the European session on Thursday, before falling to a low of 1.5562 after the official data in the US showed the economy rebounded in the Q2.
GBP resilient to flattened treasury yield curve
The preliminary US Q2 GDP printed at 2.3%, confirming the widespread expectation that the negative effect of transitory factors seen in the Q1 faded away. Even the Q1 GDP was revised higher to 0.6% from the earlier estimate of a 0.2% contraction. The upbeat data comes after the FOMC statement, which sounded upbeat on the economy and raised hopes of a rate hike in September. Moreover, the Treasury yield curve flattened (two year yield rose while the 10-year and 30-year yield fell), which usually happens when the expectations on the rate hike are on the rise. Still, the cable recovered above 1.56 on the Asian session today.
Technicals – Daily close above 1.5639 could be seen today
The spot is back above 1.56 but stays below 1.5639 (38.2% of June rally). The pair once again failed to take out the same on the closing basis in the previous session. Thus, outlook stays bearish so long as we do not witness a daily close above 1.5639. However, the spot has bounced-off from 1.5593 (61.8% of 1.5671-1.5467) after having formed a Doji candle in the previous session. The pair has also taken out the hourly 50-MA at 1.5613. Consequently, the bulls may finally be successful in pushing the pair above 1.5639 on closing basis. The intraday gains could be capped at 1.5671 and 1.5690. Meanwhile, intraday failure to rise above 1.5639 could push the spot back to its 50-DMA located at 1.5548.
EUR/USD Analysis: Further losses likely
The EUR/USD pair fell to an intraday low of 1.0892, before profit taking led to a slightly less painful closing at 1.0929. US dollar rose broadly against major currencies as US Treasury yield curve flattened after the release of US gross domestic product data, indicating the rise in the September rate hike bets in the US.
Weak EZ CPI could hurt the EUR
The preliminary Eurozone CPI for July is seen rising 0.2% year-on-year, while core CPI is seen rising 0.8%. However, there is a risk of a downside surprise, mainly on account of the sharp drop in Crude prices. The German CPI released on Thursday did miss expectations due to fall in energy and motor fuel prices. A similar effect is likely to pull down the Eurozone CPI number today. Meanwhile, the German retail sales are seen rising 0.3% in June, compared to 0.5% in May. A positive surprise could see the pair re-test the critical resistance at 1.0964 (50% of Mar-May rally).
Technicals – Bearish daily close
The spot closed below 1.0964 (50% of Mar-May rally), which acted as a strong support on multiple occasions since late June. Consequently, doors are open for the bears to push the spot lower to 1.0870 levels. The RSI on the hourly and 4-hour time frame stays below 50.00, indicating more room for losses. A minor upmove towards 1.0964 from the current level of 1.0938 could be seen, although the uptick could be utilised by markets to initiate fresh offers. But, the EUR bulls would be back in the game only in case of the daily close above 1.0964.
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