The USD selling ran out of steam in the NY session, courtesy of which the GBP/USD pair drifted lower to 1.4154 (38.2% of 1.4669-1.3835). The spot clocked a high of 1.4194 levels on broad based USD weakness.
Cable had dropped in Europe after the data in the UK showed the seasonally adjusted Markit/CIPS UK Services PMI fell to 52.7 in February, from 55.6 in January. The reading was the lowest since March 2013. However, the spot rebounded from 1.4032, which was a confluence of 23.6% of 1.4669-1.3835 and 10-DMA. Consequently, the bid tone strengthened further in early US session.
The main event for the day is the US non-farm payrolls release and its possible effect on GBP/USD pair is discussed here (Macro Scan).
Technicals – Bearish below 1.4154
Sterling’s failure to sustain above 1.4154 (38.2% of 1.4669-1.3835) coupled with overbought RSI on the 4-hour chart and bearish daily RSI could see the currency drop to 1.4079 (Jan 21 low).
A break lower would expose 5-DMA 1.4053-1.4032 (23.6% of 1.4669-1.3835).
On the other hand, a rebound from 1.4154, followed by a rise above 1.4179 (daily high) would open doors for a rise to 1.4252 (50% of 1.4669-1.3835).
EUR/USD Analysis: Falling trend line breached
The EUR/USD pair spiked to 1.0973 levels on the back of broad based USD selling in the NY session. The Eurozone business conditions, as represented by the PMI indices, had one of the worst months in February. Deflationary pressures continued to strengthen as well. This solidifies expectations for further monetary policy easing.
As for today, the focus is entirely on the US non-farm payrolls release. The impact on the EUR/USD pair is discussed in detail here (Nonfarm Payrolls Forecast).
Technicals – Is it forming Inverse head and shoulder?
Euro breached the falling trend line on the hourly chart and currently sits above 1.0940 (61.8% of Mar 15 low-Aug high).
The hourly chart shows, the pair could form an inverse head and shoulder pattern if it dips to around 1.09 levels and rebounds. In such a case, the neckline resistance is seen at 1.0975.
Bear grip would strengthen if the spot takes out falling trend line support at 1.09, in which case the prices could drift lower to 1.0860.
An inverted head and shoulder breakout would open doors for a rise to 1.1125 levels.
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