EUR/USD Daily Forecast – Euro Boosted By a Weaker Dollar

Friday’s Price Action Cannot Be Ignored

It led to a bearish engulfing candle on the daily dollar index (DX) chart and a morning star reversal pattern on a daily chart for EUR/USD.

The candle on DX for Friday nearly fully wiped out four days of gains. There is a bit of divergence in the inverse correlation between it and EUR/USD. Specifically, EUR/USD only erased about half of the early week losses on Friday’s recovery.

As such, the DX daily chart paints a much stronger case for continued dollar weakness. However, DX is near support at a horizontal level that held it lower in early May and higher in the late month.

I don’t think a catalyst is in place for an early week break down which is why I expect the dollar can bounce a bit in the session ahead.

Technical Analysis

EURUSD 4-Hour Chart

The above 4-Hour chart shows a confluence of resistance overhead. It comes from the 100 moving average and the upper bound of a declining trend channel.

The 200-period moving average is slightly above the 100 to offer additional resistance. Currently, it resides at 1.1193.

Going into the North American session, the 4-hour candle close will be important. A close near session lows would result in an evening star pattern which would encourage New York traders to try a short position.

EURUSD Hourly Chart

On an hourly chart, EUR/USD has been holding above the 200-period moving average. Since bouncing from it, the pair has climbed back above a horizontal level at 1.1170.

Overhead resistance at 1.1183 looks quite strong to me, considering the prior failure and the presence of the trend channel mentioned above.

The 100-period moving average seems to be converging to a horizontal level at 1.1150. I think this area offers strong support in the event of a decline.

Bottom Line:

  • Although EUR/USD shows upward momentum, I expect it can pull back from here considering the resistance in play. A test of support at 1.1150 seems possible.
  • There will likely be a lot of stops above 1.12. I think if we move above it, there could be a jump in volatility as bears look to cover.
  • Considering the signals provided by the EUR/USD and DX daily charts, I think EUR/USD can move higher later in the week. I may consider a long position from support at 1.1150/1.1144 if we get there.

GBP/USD Daily Forecast – Sterling Recovers From Support

The US Dollar Fell Sharply on Friday

Friday’s price action across the majors was mostly as a result of a broadly weaker dollar. The US dollar index (DX) gained for four consecutive days last week until Friday’s turn wiped out most of the weekly gain.

On a daily chart, this has led to a bearish engulfing candle for DX. I consider it quite significant considering how much of the prior rally it wiped out.

GBP/USD stands to recover some earlier losses, but bear in mind, Sterling was the weakest among the majors in May. Perhaps there may be some better pairs to trade in order to take advantage of the current down momentum in the greenback.

Unlike Last Week, There are Several Market Moving Events on the Calendar

One that will be on everyone’s radar will be US Non-Farm Payrolls which are scheduled for release on Friday. Also, the ECB meeting on Thursday stands to impact the dollar and therefore there could be a spillover effect in the majors.

For the session ahead, Manufacturing PMI figures will be released out of the United Kingdom in early European trading. Later in the day, the release of US manufacturing figures stands to impact GBP/USD.

Technical Analysis

GBPUSD 4-Hour Chart

The 4-Hour chart shows the recent upward momentum as indicated by the bullish engulfing candle. The candle was as a result of a rally after testing support at 1.2575.

A bullish engulfing candle is also seen on a daily chart, as a result of the same price action.

In early European trading, the upward momentum has died down a bit. A horizontal level at 1.2654 is in play and is holding the upside thus far. Recall that this level was significant last week and the pair was supported by it for quite some time in the early week.

Similarly, horizontal resistance at 1.2677 was also an important level last week. For that reason, I see these two levels as major upside resistance in the session ahead.

GBPUSD Hourly Chart

On an hourly chart, the 200 moving average is found near 1.2654 to create a confluence of resistance. A the moment, the pair is bouncing between the 100 and 200 moving averages.

Bottom Line:

  • I think the pair could fall into a range between the moving averages over the short-term.
  • There is upward momentum as a result of Friday’s price action. Also, price action in DX suggests the next main move will be higher for GBP/USD.
  • I expect opportunities on both sides in the session ahead. I will be looking to sell a rally to 1.2677 as I expect the pair can pull back a bit from there. On a dip to 1.2624, I would be a buyer looking for a move to 1.2677. However, I think it’s important to get confirmation of the level holding on the smaller time frames.

GBP/USD Daily Forecast – Sterling Hits a 5-Month Low

An Important Low for GBP/USD

The British pound has diverged a bit from the major currencies as it is the only one to hit a fresh low against the dollar.

Sterling has also regained the top spot on the weakest major currency for the week list. In fact, it is not just the weakest for the week, but also for the month of May.

Economic Events in the Session Ahead Not Likely to Move Exchange rate

There is some housing data scheduled for release out of the UK in early European trading as well as some mortgage-related data. The items are not likely to have much of an impact on the exchange rate but should provide some further insight into the health of the UK’s housing market.

Yesterday, GDP figures were released out of the United States. Growth was reported to increase by an annualized 3.1% versus the prior estimate of 3.2%.

US inflation data is scheduled for release later in the North American session. Although the PCE index has direct implications on US monetary policy, it rarely elicits much of a response in the currency markets.

Technical Analysis

GBPUSD 4 Hour Chart

What stands out to me on a 4-hour chart is the large spike that printed after hitting fresh lows yesterday. On the above chart, it’s the fifth candle from the right.

A spike often occurs after price action that mimics a stop run.

Frequently with such type of price action, we can see downside momentum subside a bit, which is my base case expectation for the last day of trading of the month.

GBPUSD Hourly Chart

On an hourly chart, GBP/USD looks like it’s trying to break above a down trend channel. This could signal a short-term recovery, although I would focus on 1.2624 resistance.

If the overhead resistance level breaks, some major levels that were in play earlier in the week are at 1.2654 and 1.2677.

Bottom Line:

  • I think GBP/USD will bounce after hitting stops below prior lows in yesterday’s session.
  • I think a break above 1.2624 will lead to a test of 1.2654 resistance.
  • In a downturn, I’ll be watching support at 1.2575 to hold the downside in the session ahead.

EUR/USD Daily Forecast – Euro Consolidates in a Tight Range

US GDP Data Failed to Trigger Much Volatility

First quarter growth in the United States was reported to increase at an annualized 3.1%. This was slightly lower than the prior estimate of 3.2%. The data did not have a sustained impact on the exchange rate.

In North American trading today, inflation figures will be released out of the United States. Though the Personal Consumption Expenditure Index is the Fed’s preferred gauge of inflation, the release tends to have a muted response in the currency markets.

Technical Analysis

EURUSD 4-Hour Chart

The 4-hour chart above clearly shows the sideways price action that has taken place since early North American trading on Wednesday.

There was some fairly important support at 1.1135. Although buyers did not immediately respect the level. At the same time, I don’t see a clear break as the price has just been trading around it.

This general area is quite important considering a roughly 25 pip decline from current levels would lead to a fresh monthly and yearly low.

If the exchange rate does break lower, the next level I have my eye on for support is 1.1097.

EURUSD Hourly Chart

On an hourly chart, a potential inverted head & shoulders pattern is developing. The neckline falls slightly below initial resistance at 1.1144. If the pattern is activated, upside targets fall around 1.1165.

Bottom Line

  • EUR/USD has lost some downside momentum after posting three consecutive days of losses.
  • A pattern on an hourly chart is worth watching as it can signal a bit of a pullback.
  • If the pair pulls back, I’m looking to get short. I see resistance at 1.1170 which is near the inverted head and shoulders target completion.

EUR/USD Daily Forecast – Euro Threatening a Break To Fresh Yearly Lows

EUR/USD has Sliced Through Support Levels this Week

In a week with little on the economic calendar, EUR/USD has broken through many support levels without much effort. Usually, this is a strong indication of weakness.

At the same time, the pair has shown a tendency to pull back every time it pierces to fresh lows for the year. This is best seen on a daily chart below.

EURUSD Daily Chart

Some levels that I outlined in my earlier weekly forecast were 1.1170, 1.1150, and 1.1135. These levels have all triggered a bounce in the pair this week, though recovery rallies from the levels have been relatively shallow.

The level that stood out was 1.1135. While the pair breached below it, it has mostly traded around it since Wednesday’s North American session.

US GDP Data to be Released in the North American Session

I see today’s GDP release out of the United States as the highlight in a week that otherwise did not have much market-moving data.

The release stands to have an impact on the pair, especially if there is a significant deviation. However, I would be cautious of a stronger dollar on the back of the release. Mainly because, as stated above, EUR/USD has shown that it struggles to sustain a breakout. Or in this case, a breakdown.

In addition to the GDP data, other notable releases include weekly unemployment claims, pending home sales, as well as a speech from FOMC member Clarida.

Technical Analysis

EURUSD 4 Hour Chart

The 4-hour chart shows that there has not been a clear break below 1.1135 support. A sustained break would initially target last week’s low, which is also major support for May and the year thus far, at 1.1109. Some further support, in the event of a search for liquidity, is below the level at around 1.1097-1.1100.

EURUSD Hourly Chart

The hourly chart shows the pair holding within a range since the end of yesterday’s European session. To the upside, some minor resistance is found at 1.1140.

It will take a break above 1.1150 to trigger a broader recovery and to entice some of the bears this week to cover their positions. If such an event materializes, strong resistance is found at 1.1170. In addition to the horizontal level, both the 100 and 200 moving averages are in close proximity.

Bottom Line

  • Because of past price action, I think it’s easy to get trapped positioning short at these levels.
  • I like shorting from higher up. As suggested above, there is a nice confluence at 1.1170. If we get there, I may look to position short ahead of next week’s ECB meeting.

GBP/USD Daily Forecast – Cable Consolidates Near 5-Month Low

A Stronger Dollar is Weighing on the Pair

The trade-weighted dollar index (DX) found support this week and has erased a bulk of last week’s losses.

DX caught a bid at the 61.8% Fibonacci retracement, measured from the May low to high, early in the week. The index has printed a three consecutive day rally and closed at the highest level this year on Wednesday.

Last week’s spike high is within close proximity. However, it remains to be seen if the dollar index can make a sustained break to fresh yearly highs this week.

In the week thus far, the dollar has gained against all but one of the major currencies. The Aussie dollar is the exception as it trades essentially flat against the greenback.

Several Data Releases are Scheduled Out of the US Today

Preliminary GDP figures will be the highlight. Other notable releases include weekly unemployment claims, pending home sales, and a speech from FOMC member Clarida.

A strong GDP number stands to provide the catalyst that is needed to send the greenback to fresh yearly highs. However, I would exercise caution trying to chase the dollar higher.

So far, DX bears have shown that they like to step in on new highs. On several attempts since Q4 2018, DX has pulled back every time looks like it’s about to break out.

Technical Analysis

GBPUSD 4-Hour Chart

In yesterday’s article, I made a case that although GBP/USD is trending lower, it appears to be losing momentum. This still appears to be the case and it can be seen on a 4-hour chart.

Note the pair really only fell under pressure in the last few hours of European trading yesterday. Since then, the GBP/USD has recovered about half of the losses.

A horizontal level at 1.2654 was respected as support in the early week. I now see the level as strong upside resistance in the event of a recovery today.

GBPUSD Hourly Chart

Ahead of 1.2654, there is some channel resistance which can be seen in the hourly chart above.

Support at 1.2624 has held the downside thus far. One thing that stands out to me is the recovery that has taken place from the level. There’s not a lot of momentum to the upside, and on smaller time frames, the recovery has the look of a bear flag.

Bottom Line

  • There is not a lot of evidence that 1.2624 support will hold and I expect to see a break below it in the session ahead.
  • A break below last week’s low can trigger some stops and considering the downtrend for most of the week, I think that is a possibility.
  • I see the next support level at 1.2575. I would consider a long from that level if there was additional evidence of a turn on the smaller time frames. The rationale being that a catalyst seems to be lacking for a DX breakout.

EUR/USD Daily Forecast – Euro Coming Into Range Support

Will EUR/USD Break to a Fresh Yearly Low This Week?

In my prior weekly forecast, I argued that EUR/USD is likely to remain range bound this week. That is, it’s not likely to break to fresh yearly lows, at least this week.

The main rationale behind this view is that the economic calendar is quite light this week. Next week, the ECB meets and the latest employment figures will be released out of the US.

The two events carry a higher probability of providing the catalyst needed for a sustained break lower.

Data released this week has not had much of an impact on the exchange rate, and today’s early day releases out of France followed this trend.

The data was mixed with preliminary CPI figures falling short of expectations while quarterly GDP rose as expected. Consumer spending increased at a pace higher in April than anticipated.

Technical Analysis

EURUSD Daily Chart

EUR/USD is coming into support mentioned in the prior report. The horizontal level falls at 1.1150 and held the pair higher on a daily basis last week.

EURUSD 4 Hour Chart

On a 4-hour chart, the pair was held higher by a candle close basis at 1.11350. The level marks a spike high posted early in the month.

I see the level as critical range support, and to support the idea of a bounce higher, the pair should not get below it this week.

EURUSD Hourly Chart

On the hourly chart above, support at 1.1150 shows a confluence with the lower bound of a trend channel.

Upside resistance at 1.1170 appears to be very relevant. It held the pair higher in early North American trading yesterday, and since the break, has offered resistance twice already. There is some confluence with the 200 MA nearby and the upper bound of the trend channel not too far away.

Bottom line

  • I think EUR/USD can bounce from here, but the near-term trend is certainly to the downside.
  • I’m expecting that recovery rallies will be met with sellers at 1.1170.
  • In the event of a breakdown below support, I would exercise caution chasing the pair lower in the absence of a catalyst.

GBP/USD Daily Forecast – Cable Falls Into a Range

The Near-Term Downtrend has Lost Some Momentum

The price action in GBP/USD in the week thus far has been somewhat peculiar. The pair fell under pressure on Monday, but since then, a range has formed.

What makes this interesting is that Monday was a bank holiday, and as such, volatility often slows. This was not the case for GBP/USD as it was under steady pressure in early day trading.

Tuesday price action stood out even more. Mostly because the dollar caught a strong bid in the North American session. It led to a rally in USD/CHF that was a few pips shy of a weekly high. Meanwhile, EUR/USD dropped below a confluence of support below 1.1170.

So I found it surprising that GBP/USD held within a range despite the dollar strength. Perhaps it shows some underlying Sterling strength. But GBP/USD has not given a technical signal that it will reverse from the downtrend that started on Monday.

Technical Analysis

GBPUSD 1 Hour Chart

In the hourly chart above, it can be seen that most of this week’s downside pressure occurred on Monday after it hit a high near 1.2750.

The pair then consolidated near support at 1.2677 for quite some time prior to finally breaking down in early European trading on Tuesday. However, after the initial push down a range formed.

Indeed, there is some selling pressure in early trading today and an attempt to break below 1.2654.

Upside resistance at 1.2677 is now reinforced by the hourly 100 moving average.

GBPUSD 4 Hour Chart

The above 4-hour chart shows the loss of momentum a bit clearer than the hourly chart. Note the small size of the candles that followed the initial two candlestick push lower.

This chart also shows the relevance of the horizontal level at 1.2654 that offered support throughout the day yesterday.

GBPUSD Daily Chart

Lastly, the daily chart further emphasizes support at 1.2654. There has not been a daily close below it this month.

Bottom Line

  • A clear break of 1.2654 can offer a short opportunity to support at 1.2624, although I consider this to be an aggressive trade.
  • What the dollar does next will be important. I have some reservations that it will move much higher without a catalyst, and this week, the economic calendar is light. Also, EUR/USD is near an important support level that I outlined in my earlier weekly forecast.
  • I would need to see a push above yesterday’s spike high of 1.2701 to consider a bullish scenario at this stage.

GBP/USD Daily Forecast – Sterling Falls Through Support

GBP/USD Lost Upside Momentum on Monday

Despite the bank holiday in the UK and the US, GBP/USD was under pressure on Monday. The pair only posted about a quarter percent loss but selling was persistent in the first half of the European session.

The pair had been recovering higher after hitting fresh 5-month lows late last week. On a daily chart, Friday’s rally resulted in the formation of a morning star candlestick pattern. This pattern often signals reversal potential, although in this case, there has certainly been a lack of follow through.

This Week May Lack a Clear Driver

The economic calendar is light for the week. The data release that stands out is the release of GDP figures out of the United States on Thursday.

Up until now, Brexit headlines have dominated the pair. There are two major events behind us. First, Theresa May has announced her resignation. Second, the EU Parliament election results were announced yesterday.

With these events behind us and a light economic calendar, a driver might be lacking for a sustained move.

At the same time, I think Nigel Farage, head of the Brexit party, might try and take the spotlight. Since PM Theresa May will soon be out of the picture, he may look to fill the gap in Brexit negotiations.

Farage has a hard stance that the UK should leave the EU no matter what, even if that means leaving without a deal.

Technical Analysis

GBPUSD Daily Chart

The daily chart above shows the mentioned morning star candlestick pattern. The decline since yesterday’s high has shadowed that pattern quite a bit. I expect a break below Friday’s low will cause worry to GBP/USD bulls.

GBPUSD 4-Hour Chart

Just below Friday’s open, a horizontal level is found at 1.2654. This level has been respected in the past as can be seen on the 4-hour chart above. Note the earlier channel break. This channel had contained price action for most of the month ahead of the breach. This is what led me to believe we may see a recovery rally in my prior report.

The hourly chart shows 1.2654 holding thus far. What happens in North American trading will be important. Especially if the last 4-hour candle closes above 1.2677. This level will be significant for a directional bias in the session ahead.

GBPUSD Hourly Chart

Ultimately, today’s high of 1.2702 will be pivotal. Only a break above it would negate the bearish momentum seen since yesterday. The high was set at the European open where GBP/USD briefly saw volatile swings in both directions.

Bottom Line:

  • Recent Price action casts a shadow of doubt on my earlier view of a relief rally
  • At the same time, a catalyst seems to be missing for a break lower this week
  • GBP/USD appears to be quite oversold after declining much of the month therefore I don’t think it makes sense to chase it lower into the end of the month.

EUR/USD Daily Forecast – Euro Pulls Back in the Early Week

EUR/USD Faced Selling Pressure from Resistance on Monday

The 200-period moving average on a 4-hour chart capped the recover rally in EUR/USD on Monday. There isn’t a lot of downside momentum, however, and I don’t see enough evidence that a major top is in.

A Light Economic Calendar this Week Suggests a Range

What seems like the only significant data release this week are the GPD numbers from the United States. They are scheduled to be reported on Thursday.

The pair is likely to see more volatility next week as two events stand the move the pair. The ECB meeting next Thursday, and US employment figures the next day.

German consumer survey results and German import price were reported to fall short of analyst expectations today. The early day release did not have a significant impact on the currency pair.

In early North American trading, the Conference Board will report Consumer Confidence figures. The data release typically does not have a sustained impact on the exchange rate.

Technical analysis

EURUSD 4 Hour Chart

As mentioned, resistance on the 4-hour chart capped the earlier rally in EUR/USD. This area between roughly 1.1210-1.1220 remains a hurdle in the session ahead.

EURUSD Hourly Chart

The hourly chart shows quite a bit of downside support. The 200 and 100-period moving averages come into play. Slightly below them is a horizontal level at 1.1170.

I consider support at 1.1150 as a major level as it held several dips last week.

EURUSD Daily Chart

On a daily chart, EUR/USD seems to be stuck in a range. The chart further shows the importance of 1.1150 as it held the pair higher on a daily basis last week. I see upside range resistance at 1.1259. It not only reflects a horizontal level but also intersects with the upper bound of a downtrend channel. This channel has contained price action for most of the year.

Considering that I’ve taken the stance that the pair will range this week, I’m not seeing anything interesting in the pair at the moment.

I certainly don’t see the pair breaking down this week. At the same time, the overhead resistance confluence at 1.1259 looks too strong to try and front run a break.

Perhaps a better pair to consider if trying to take advantage of the dollar pull back is USD/CHF. Because this pair has a much more established trend, as it’s been trending lower since late April, it’s seems a safer bet. Just keep in mind it’s currently supported by its 100-day moving average.

EUR/USD Weekly Forecast – Good Potential For a Range This Week

Thursday’s Price Action Was Significant But Does Not Confirm A Broader Recovery

The price action that stood out last week was when EUR/USD made a marginal break below the April low to set a nearly yearly low. However, the move was not sustained. The price action that followed seems to suggest that bears selling a potential breakdown covered their position quickly.

The level I’m focused on, and I presume many others, is resistance at 1.1259. A break above it would imply a double bottom and can signal a much broader recovery.

There is also the upper line of a descending trend channel that has encompassed price action for most of the year.  Currently, the two are creating a confluence.

EURUSD Daily Chart

A double bottom points to a measured move target of 1.1415.  Personally, I don’t see that happening at this point.  The pair has shown range bound type price action for several weeks. There also seems to be a lack of a catalyst for such a move.

A Light Economic Calendar Suggests a Range

There is not a lot on the economic calendar this week, and there is a bank holiday today in the US. I expect a technical break, if one were to occur, will happen next week.

The ECB meeting takes place then and is more likely to present a catalyst. In addition to the ECB, US jobs numbers will also be released. In the meantime, a range seems probable for the week ahead.

Technical Analysis

The 4-hour chart shows important upside resistance at 1.1217.  There is confluence as the 200-period moving average is within close proximity.

EURUSD 4-Hour Chart

On an hourly chart, upside momentum is quite evident from recent price action. I see a notable resistance level at 1.1217 as mentioned. There is some minor resistance just above it at 1.1229 which I expect would contain any spikes. Initial support is at 1.1183 and then 1.1170. The main support level to watch out for this week is 1.1150.

EURUSD Hourly Chart

I’m anticipating a range in the week ahead so it makes sense to me to fade extremes. EUR/USD would need to get above 1.1259 for a clear bullish bias. On the other hand, a break below 1.1135 signals selling pressure.

GBP/USD Daily Forecast – Technical Outlook Points to Recovery Potential

Brexit Continues To Be The Primary Driver

The British pound continues to be the weakest major currency in the month thus far, despite the relief rally late last week. Much of this can be attributed to Brexit developments. As such, related headlines are likely to continue providing a catalyst for the next move in the currency pair.

Election results announced ahead of the European open indicated that the newly formed Brexit party, led by Nigel Farage, has won a majority of the EU seats allocated to the United Kingdom. Farage has been demanding a seat at the Brexit negotiations table after Theresa May announced Friday that she will be resigning on June 7th. His stance on Brexit is that the UK should leave the EU by October 31 by all means necessary – even with a ‘no deal’ if need be.

Recent Technical Developments suggest GBP/USD Has Reversed Course, At Least in the Near-Term

Although the predominant trend in GBP/USD remains to the downside, technical developments late last week tell me that perhaps a near-term bottom is in. On a daily chart, a morning star candle has printed which is a bullish reversal pattern. The pattern is on the chart below.

GBPUSD Daily May 27
GBPUSD Daily May 27

What provides more conviction that we could move a bit higher from here is a channel break on an hourly chart. The chart below shows a descending channel has contained price action for most of the month. GBP/USD tested the upper bound of the channel on news of Theresa May’s intention to resign on Friday. Eventually, during North American trading, a bullish break above the channel materialized. I do see some minor resistance coming into play at 1.2752 going into European trading. As well, the 200-period hourly moving average comes into play.

GBPUSD Hourly May 27
GBPUSD Hourly May 27

Zooming down lower into the 15-minute time frame there is some further resistance.  Specifically, from a rising channel that originates from last week’s low.

Considering that it’s a bank holiday in the UK and United States today, I expect a drop in volatility.  Actually, there really isn’t anything that I think can have a significant impact on the pair until Thursday. GDP figures will be released that day from the US.   Of course, as mentioned, any type of Brexit headline stands to move the pair.

GBPUSD 15 Minute Chart

Considering the bank holiday, a short from resistance at 1.2752 might make sense as the pair could fall into a bit of a range. I’m focused on trying to get long from a lower level. Strong support is near the bottom of the rising channel. It currently confluences with a stronger horizontal level at 1.2677.

EUR/USD Daily Forecast – Break or Fake?

Recent Price Action Reaffirms Downtrend

Last week’s failure around 1.1260 resistance has reintroduced selling pressure in EUR/USD which led to a bearish engulfing candle on a weekly chart. As often expected with such a candlestick pattern, rallies this week have been short and met with sellers. The pair is now at a fairly important inflection point as it is seen testing support from this month’s spike low at 1.1135. On a daily chart, the pair is clearly seen trending lower as an ascending trend channel has encompassed price action for most of the year thus far. However, one thing to note is the general lack of selling pressure, especially when compared to price action last year around this time. This is evident by the recovery rallies that have followed each time EUR/USD has made a marginally lower low for 2019.

EURUSD Daily May 23

Today’s Events Might Not Justify a Breakdown

In addition to several Purchasing manager index figures scheduled for release today and ECB monetary policy meeting minutes, the European Parliament election start today. The PMI data reaction was relatively muted as the pair held within a roughly 10 pip range during the several releases. Eurozone flash Manufacturing and Services PMI figures fell short of analysts expectations but an initial spike below support was promptly reversed. The ECB minutes often elicit a muted reaction similar to the PMI data, unless it contains information that is notably different from the earlier released rate statement and press conference.  The election stands to have some impact, however, results won’t be released until May 26. Although the technical outlook points to selling pressure, a sustained break might require some form of a catalyst.

Technical Outlook

EURUSD Hourly May 23

For the session ahead, the first level of overhead resistance is found at 1.1144 as the level triggered a bounce in the early week.  Technical traders will be mindful of candle closes on an hourly chart as some initial buying in early European trading from 1.1135 support may lead to a doji candlestick which signals indecision. Above 1.1150 a stronger resistance level is found at 1.1150 as the hourly chart shows that the level acted as support on several tests since late last week. In the event of a sustained break above the level, sellers may consider positioning at a resistance confluence found near 1.1170. The area contains a horizontal level as well as the upper line from a declining trend channel that has contained price action since around the middle of the month.

To the downside, EUR/USD has already made a marginal break below the early May low of 1.1135 which has likely triggered some stops from weak hands.  A sustained break shows further support at the April low of 1.1109. Bears that are focused on 1.1135 support are likely looking for a move towards the  1.0975 – 1.10 area which is considered to be major support for the pair.

GBP/USD Daily Price Forecast – Sterling is Due For a Bounce, But a Catalyst Is Needed

GBP/USD Under Persistent Pressure

GBP/USD has been selling off aggressively since early May.  Although there has been some headline driven rallies in the early week, they have been short-lived.  Sterling is the weakest currency for the week and for the month thus far.  Against the greenback, the Pound is down just over 4% as measured from a high posted early in the month.  Over the last 13 sessions, GBP/USD has only managed to close two days in the green, however, both those days saw only marginal gains.  Buyers will be reluctant to step in considering the absence of a catalyst.  At the same time, recent price action points to a one-way market which increases the risk of a stop run higher.  The risk to reward for longer-term traders is deteriorating at current levels but short term traders will tend to continue focusing on the downside until a technical reversal or a shift in fundamentals materializes.

Sterling is Particularly Sensitive To Headline News

Consumer price inflation was reported to rise 2.1% on an annual basis, which was slightly below the analyst forecast, while core prices rose in line with expectations.  Yesterday’s data release did not have much of an impact on GBP/USD as Brexit developments are driving the pair and will likely continue to do so.  In this context, tomorrow’s UK retail sales report may have a smaller market reaction than usual.

British Prime Minister Theresa May is expected to announce her resignation data as soon as Friday and traders will be actively monitoring their news feeds as this announcement will have an impact on the exchange rate.  Pressure for her to announce her departure increased yesterday after her latest proposal entertained the idea of a second referendum.  The proposal led to outrage from some members of parliament and resulted in the resignation of House of Commons leader Andrea Leadsom who has lost faith that an EU exit will materialize.

Technical Outlook

GBPUSD 1H May 23
GBPUSD 1H May 23

On an hourly chart, the downtrend remains quite clear as a descending trend channel has encompassed price action for most of the month.  Major resistance for the remainder of the week is found at 1.2677. It will take a break above the level as well as above the upper line of the channel to signal a reversal of trend.  A confluence of support is seen at the lower bound of the channel as it intersects with a horizontal level at 1.2575. This is an area that could trigger some profit taking and potentially a reversal in the event a test of the area aligns with a shift in fundamentals.

For the session ahead, the 15-minute chart below shows initial resistance at 1.2624 which reflects yesterday’s spike low. A break above it targets 1.2648 which has been respected as both support and resistance. The latter level is considered to be major resistance for the day. The main area of interest to the downside falls at 1.2575 as mentioned above.

 

GBPUSD 15M May 23
GBPUSD 15M May 23