GBP/USD Forecast: Inverted head and shoulder on hourly, Eyes 1.4380

The GBP/USD pair fell to a low of 1.4223 and extended losses to 1.4206 in Asia. The British Pound fell on Monday after the data in the UK showed order book balance of the survey dropped to -15 percent in January from -7 percent in the previous month. Economists had forecast a -10 reading. The balance of total new orders for the three months to January improved to -4 from -8 in the three months ended October. Apart from the weak data, a moderate risk aversion so weighed over Sterling.

As of now, the currency pair is trading around 1.4224 levels. The UK economic calendar is empty; hence, the pair remains at the mercy of the overall market sentiment. Later today, the preliminary US Markit services PMI and composite PMI numbers are due for release.

Technicals – Eyes inverted head and shoulder neckline

• The hourly chart clearly shows the pair is in a process of forming an inverted head and shoulder with the neckline resistance at 1.4380.

• The spot could find bids around the 5-DMA at 1.4215 and rebound.

• If the spot takes out the immediate resistance of 1.4273 (falling channel resistance), the pair could swiftly move to the inv head and shoulder neckline at 1.4380.

• On the other hand, a failure to take out 1.4273 could see a renewed sell-off that would take out the immediate support at 1.4140 and open doors for a re-test of 1.4079.

EUR/USD Analysis: Focus remains on oil

The EUR/USD pair advanced on Monday, but the gains were limited as demand for the US dollar remained intact ahead of the Federal Reserve's upcoming policy meeting this week. The shared currency ignored the weak German business data that missed expectations with business expectations and business climate reporting much lower than expected. IFO researchers blamed the second monthly drop in a row to the financial market instability over the past few weeks.

The data calendar in Europe is empty; hence the pair shall continue to track the movement in the equity markets. The risk-off is gathering pace ahead of the European opening bell as oil prices are in the trading in the red. The risk-off should support the EUR and vice versa.

Technicals – Bullish above 1.0860

• Euro’s repeated failure to dip below the falling trend line on the 4-hr chart indicates the currency pair may take out the immediate resistance at 1.0860 and test 1.0890 (38.2% of 1.1495-1.0517) levels.

• A break above 1.0890, though unlikely, could see the pair rise to 1.0931 (23.6% of 1.0517-1.1060).

• On the other hand, a failure to sustain above the falling trend line on the 4-hr chart could open doors for a fresh sell-off to 1.0788 (540% of 1.0517-1.1060).