The GBP/USD pair rose to an intraday high of 1.5381 on Monday, before trimming gains to end the day at 1.5350 levels. The closing marked a failure to take out 50-DMA resistance and also a failure to sustain above 1.5355 (38.2% of 1.5107-1.5509).
GDP may surprise on the positive side
UK Q3 GDP figures are due for release today. Economists see quarter-on-quarter growth slowing to 0.6% from previous figure of 0.7%. However, the GDP could surprise on the higher side; courtesy of super strong UK retail sales number released last week. In case, the number is higher than 0.7%, Sterling could spike to 1.54 – 1.5423 (hourly 200-MA) levels. But the rally may not sustain. Last week’s super strong retail sales did lead to a 40-50 pip spike in Sterling, which was quickly erased (since the boost was due to Rugby world cup – a one off event). A similar move could be seen today in case the number is higher than 0.7%.
US durable goods report
The corporate spending in the US; like consumer spending; has not been encouraging despite the record stock market rally, ultra easy monetary policy. Even the talk of a rate hike has not seen corporate boost spending in anticipation of higher rates in near future. Hence, a negative figure is likely to kill the US dollar ahead of the FOMC rate decision tomorrow. The Fed rate hike bets continue to slide amid a fresh round of monetary easing in Europe and Asia.
A combination of a strong UK GDP figure and a weak US durable goods report could send Sterling above 1.5420, which is the falling trendline resistance on the daily chart.
Technicals – Falling channel on the hourly chart
Sterling is moving a falling channel on the hourly chart. A break above the channel resistance currently seen at 1.5360 could push the pair higher to 1.54. A daily close above 1.5420 (falling trend line resistance on the daily chart) would turn the short-term outlook bullish. On the other side, a failure to take out the falling channel resistance at 1.5360 could push the pair down to 1.5280 (channel support). A break below the same would 1.5240-1.5200 levels.
EUR/USD Analysis: Technical recovery may continue on weak US data
The EUR/USD pair rose to a high of 1.1068 on Monday as investors took a breather following a sharp fall to a fresh two-and-a-half month low. A sharp drop in the US new home sales added to the weak tone on the US dollar.
Focus on US durable goods data
The technical recovery may continue in case the US durable goods orders print in negative. As said earlier, the corporate spending has stayed anaemic , raising doubts on whether the US economy would be able to sustain a rate hike. The probability of a Fed rate hike is already very low and a weak durable goods number would only add to the bearish pressure on the USD ahead of tomorrow’s FOMC rate decision.
Technicals – Bulls need a close above 1.11
Euro faces multiple resistances on its way towards 1.11 handle – 1.1076 (rising trend line resistance), 1.1088 (50% of Mar-Aug rally). The next resistance is seen at 1.1116 (200-DMA). Hence, the EUR bulls would need atleast a daily close above 1.11 in order to halt the fall and lead to consolidation/technical correction in the pair. On the other hand, a failure to take out 1.1076 would push the pair back to 1.10 handle. A strong US durable goods report could easily push the pair below 1.10.