The corrective rally in the GBP/USD pair was cut short by the release of better-than-expected US manufacturing PMI indices. Both, Markit and ISM PMI, printed below 50.00, but came-in above estimates. This was enough to trigger speculation that manufacturing sector may have bottomed out in February. Earlier in the European session, the UK manufacturing PMI came-in at 34-month low, but somehow the technical factors (oversold nature) ensured the pair rose to a high of 1.4018 before trimming gains to end the day at 1.3951 levels.
Eyes BOE speak and construction PMI
Sterling traders await construction PMI, which is expected to show the pace of expansion in the activity remained unchanged in February. The data is the least important when compared to manufacturing and services PMI reports. Nevertheless, a corrective rally in Cable could gain traction if the construction PMI blows past expectations.
The data would be followed by BOE’s Broadbent’s speech. The policymaker is one again likely to state low inflation and weak wage growth as major roadblocks in path to rate hike. Last month, Broadbent had said there is “no urgency” to raise the benchmark rate from a record-low 0.5 percent, where it’s been for almost seven years. Similar comments could hit the wires today and may weigh over Sterling.
Technicals – Strong resistance at 1.4014
Sterling’s failure to take out 1.40 on closing basis despite the bullish price RSI divergence indicates the currency pair could test the hourly 10-MA at 1.3930.
A break below the same could happen, given the bearish RSI on daily and 4-hour chart
On the other hand, a corrective rally would resume only if the spot manages to take out sideways channel resistance 1.4014 – 1.4022 (hourly 200-MA).
EUR/USD Analysis: Watch out for a rebound from 61.8% Fibo support
The EUR/USD pair fell to a low of 1.0834 on Tuesday before trimming losses to end the day at 1.0866 levels. German manufacturing PMI printed at 15-month low and only heightened speculation the ECB may come out more aggressive next week. However, the currency found support from the resilience in the German bond yields despite increased odds of aggressive ECB easing. The spot currently trades around 1.0865 and remains at the mercy of action in the German bond yields and US ADP data.
Technicals – Bullish RSI divergence
Pair’s bearish daily closing below the symmetrical triangle trend line support of 1.0875 has left the doors open for a re-test of 1.0845 (61.8% of 1.0517-1.1376).
However, the hourly chart shows price-RSI divergence could see the pair take out hourly 50-MA resistance of 1.0879 and rise to 1.0935 (100-DMA).
The spot could drop to near 1.0845 if the European equities open on a positive note, however, the bullish RSI divergence could ensure a recovery.
Only a break below previous day’s low of 1.0834 would open doors for a further sell-off to 1.0750 levels.
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