GBP/USD continues to fall

Regardless of the fact that US markets were closed for Martin Luther King Day, the dollar continued to gain against both the euro and sterling. 

Sterling notes
Source: Bloomberg

EUR/USD eyes 50-H MA

The start of the trading week has been understandably calm due to the US bank holiday. GBP/USD has not traded too far away from $1.16 since Friday, and is currently awaiting stimulus from Thursday’s big announcement. Once again the behavior of this currency cross will be greatly affected by the tone and content of Mario Draghi’s speech on Thursday. EUR/USD is likely to get more nervous and jittery the closer we get to 1.30pm on Thursday (London time).

Whatever is announced by the European Central Bank will only be the first major stimulus to EUR/USD as we are also expecting to hear the results of the Greek general election next week. Judging by the comments coming from European finance ministers over the last week there is a worry that change will be voted in.

Current levels for EUR/USD of $1.1582 are intertwined with the 50-hour moving average but this relationship could quickly be tested with German ZEW sentiment figures out at 10am (London time). 

GBP/USD could retest $1.5034

Under normal circumstances currency markets would be eagerly anticipating the Bank of England minutes, and an opportunity to see if there was any change in the voting by the Monetary Policy Committee, but its importance feels somewhat diluted this time round. Worries about the health of the eurozone and the direction the ECB is taking it in is clouding opinion on sterling.

Currency markets are now looking at the first or second quarters in 2016 as the likely time for a start to interest rate rises. With this date being pushed further and further away there is little reason why GBP/USD will find an excuse to rise in the short-term.

The diversification between the 200-day moving average and GBP/USD continues, as a retest of $1.5034 lows seen earlier in the month could well be on the cards along with a move back into oversold territory. 

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