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Greece’s roadshow gets underway

The Greek finance minister begins his tour of EU finance ministers, and the pound dips ahead of UK manufacturing figures. 

Alexis Tsipras, Syriza party leader

Euro eyes Greek debt

The EUR/USD has consolidated in the $1.1310 region, and the market is keeping an eye on Greece’s attempt to reduce the level of its outstanding debt. The Syriza party hasn’t wasted any time since gaining power, and the new Greek finance minister Yanis Varoufakis is hoping to meet with EU finance ministers to try and restructure Greece’s debt.  Mr Varoufakis wants to circumnavigate the troika, and talk directly with European finance ministers as he doesn’t want to talk to ‘technocrats’. The market is afraid that Greece will demand excessive relief on its debt or, even worse, threaten to default, and that is why EUR/USD’s downward trend will remain intact.

The US will reveal its ISM manufacturing report at 3pm today (London time). The market is anticipating a reading of 54.9 in January, which compares with the December reading of 55.5. The EUR/USD pair will receive short-term buying should the report miss expectations.

The downside bias for EUR/USD remains in place, but it has been trading within a tight range recently. The 200-hour moving average of $1.1360 is acting as resistance and, should this level hold, $1.1280 will be the target and the next level of support will be $1.1240. To the upside, a move through $1.1360 will bring $1.14 into play.

Spot FX EUR/USD chart

Sterling continues to slide

The pound has dropped in overnight trading versus the US dollar, as this week’s Bank of England meeting and US jobs report will underline the widening gap between the UK and US economies. As I previously stated, the Federal Reserve is more likely to increase rates than the BoE this year, but a rate rise from the US is not pencilled in until the second half of the year. The softer-than-expected growth figures from the US last week will halt the rapid decline of GBP/USD, but the downward trend will remain in place.

At 9.30am (London time) the UK will announce manufacturing PMI figures for January, where the consensus is for a reading of 52.9. Despite manufacturing accounting for a relatively small section of the UK economy, it will spark some short-term buying actively should expectations be met.

The GBP/USD pair is encountering immediate resistance at the 50-hour moving average of $1.5075, and should this metric be held it will bring the downside support of $1.50 into play. A move through the 200-hour moving average at $1.51 will make $1.52 the target.

Spot FX GBP/USD chart

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