GBP/USD Forecast: Double bottom on charts, eyes 1.5160

The GBP/USD pair advanced to a high of 1.5136 on Wednesday and ended around the same. Demand for Sterling spiked after the UK Office for Budget Responsibility (OBR) revised the 2016 GDP forecast higher. Chart driven strength also came into play after a string of an upbeat US data failed to keep the pair below 1.5087 (61.8% of Apr-Jun rally).

The data calendar is empty.The UK financial stability report may not offer much trading cues to the markets. The US markets are closed on account of Thanksgiving day. So the stage appears set for a low liquidity erratic moves in the FX markets today. Sterling could turn out to be a top performer against the US dollar; given the backdrop of upbeat OBR forecasts and bullish technical breakout on the intraday charts.

Technicals – double bottom breakout on hourly

The pair witnessed a double bottom breakout on the hourly chart in the NY session. The neckline support (then resistance) now stands at 1.5114. The breakout has opened doors for 1.5172 (double bottom target). At the moment, the spot is flirting with 1.5120 (23.6% of 1.5336-1.5053), with hourly RSI above 50.00. Consequently, the pair appears poised to test 1.5161 (38.2% of 1.5336-1.5053)-1.5172 (double bottom target). On the other hand, a failure to sustain above 1.5114 could lead to a re-test of 1.5087 (61.8% of Apr-Jun rally).

EUR/USD Analysis: Too much indecisiveness leads to correction

The EUR/USD pair ratcheted higher in early Europe to 1.0689, before falling back to 1.0630 and then extending losses to 1.0565 in early US. The pair managed to take back a major part of its losses and end moderately weak at 1.0624 levels.

Euro took a beating on two things – strength in the stock markets and reports that the ECB is considering implementing a number of unconventional measures for next week. As of now, a deposit rate cut appears more likely, since the expansion of the QE would be a hard sell.

EUR/USD Technicals- Candles indicate indecisiveness

The daily chart now shows – Dragonfly Doji (Monday), spinning bottom green (Tuesday), and a classic spinning bottom red (Wendesday). This indicates a high level of indecisiveness in the markets. Traders know that EUR should go lower on account of diverging Fed and ECB monetary policies, however, the question is sell Euro for what - for parity or for yearly low of 1.0463. The shared currency is already down 1000 pips since Mid-October and there is still some amount of doubt fi the Fed liftoff will happen and how the markets would react to it. History shows the USD suffered losses as Fed began tightening in the past.

Consequently, there is lot of indecisiveness in the markets as indicated by the candlestick patterns.

The lower lows formation continues, however, RSI once again witnessed a higher low formation yesterday. Hence, we may see another attempt at 1.07 levels today. On the downside, a break below 1.0565 would open doors for a re-test of 1.05. Usually, indecisiveness leads to a technical correction, hence, the likelihood of a move to 1.07 is high.