GBP/USD Forecast: Bearish break on charts, Eyes 1.48

The GBP/USD pair fell to an intraday low of 1.4865 levels on Thursday as the markets continue to build fresh long USD positions after Fed surprised investors with its hawkish Dot Chart. Sterling spiked from 1.4938 to 1.5002 levels in Europe in anticipation of a rebound in the UK retail sales, but failed to find takers even though the rebound was much higher than the market estimates.

The pair took out 1.48595 support as expected in the scenario study report (Macro Scan), but has recovered to 1.4929 levels in Asia today. With no major UK data due, the USD could remain bid heading into the holiday season.

Technicals – Bearish break below falling channel

• As pointed out in the report here (Macro Scan), the pair is moving in a two falling channels.

• As of now, the daily chart shows, the pair has witnessed a bearish break below the falling channel despite the upbeat UK retail sales data.

• Consequently, the cable appears likely to test another falling channel support at 1.48 levels. The slide would gain pace below 1.4888 (76.4% of Apr-Jun rally)

• A daily close above 1.4934 (bigger falling channel resistance) would open doors for a re-test of 1.5070 (falling trend line – Nov 2 high to Nov 19 high – resistance).

EUR/USD Analysis: Weak stocks could support EUR

The EUR/USD pair fell below 1.0890 (38.2% of 1.1495-1.0517) and extended losses to hit a session low of 1.0803 levels on Thursday. The broad based USD demand on account of the hawkish Fed dot chart pushed the EUR/USD pair.

EUR could re-test 1.0890 on weak stocks

The stock markets in the US dropped more than 1%, highlighting nervousness among investors due to prospects of four rate hikes next year. Investors were expecting a 25 basis points, but were not prepared for the Fed to hint at four hikes in 2016.

The Asian equities have turned lower today as well. At the time of writing, the S&P futures were down 0.25%. Consequently, the odds of the weakness in the Eurozone stocks is high and that may help the EUR re-test 1.0890 (38.2% of 1.1495-1.0517) levels.

Technicals –Bearish view intact

• Euro’s close below 1.0890 (38.2% of 1.1495-1.0517) after having failed repeatedly to take out the 200-DMA and sustain above 1.10 levels indicates the currency could be heading towards 1.0748 (23.6% of 1.1495-1.0517).

• However, re-test of 1.0890 appears likely on account of the weakness in the stocks.

• But, the bearish developments on the daily chart mentioned above says the pair is unlikely to take out 1.0890. Thus, a failure to rise above 1.0890 could result in a break below 1.0803 (previous day’s low)and a slide to 1.0748 levels.

• Only a daily close above 200-DMA at 1.1037 levels could turn the outlook bullish.

EUR/JPY: Is it heading towards 130.30 levels?

The BOJ kept the rates unchanged, but announced announced an additional JPY 300B in annual ETF purchases beginning in April. But, this program is initiated to offset a program that started in 2002 to buy financial shares which are scheduled to be sold slowly beginning in April and continuing for 5 years.

Consequently, the stimulus is not as big as it initially appeared and thus the Nikkei index dropped into losses, while the Japanese Yen regained its poised.

Technicals – Falling channel on the daily chart

• EUR/JPY’s failure to sustain above the 50-DMA despite the BOJ’s minor stimulus announcement, coupled with the increased odds of a correction in the stock markets has opened doors for a drop to 131.69 (23.6% of 149.79-126.09).

• The daily chart shows the cross is moving in a falling channel and the upside momentum has repeatedly stalled near channel resistance.

• Consequently, a break below 131.69 would open doors for a drop to the channel support at 130.30 levels.