Greenback pulls back

A broad decline in the dollar helped GBP/USD and EUR/USD, but the MPC voting breakdown and Greek uncertainty could reverse the gains.

Source: Bloomberg

Sterling eyes MPC votes
The pound has been edging higher ahead of the MPC voting breakdown at 9.30am (London time). Awaiting the announcement, the market is expecting all nine members to vote in favour of keeping rates on hold and for the stimulus package to be kept unchanged at $375 billion, which will prompt short-term buying.

The chances of the voting breakdown coming in different to the expectations are low, but if it were to be different the bias it’s leaning towards is a vote in favour of lowering the interest rate.

As I previously stated, the UK inflation rate is at zero, but if you round it off to two decimal places it is in contraction, and this is cause for concern as the UK is teetering on deflation.

GBP/USD is receiving support at the 100-hour moving average (MA) at $1.4925, and the resistance at $1.50 will be the first target. If that is cleared, last week’s high of $1.5048 will be the next target. A drop below the 100-hour MA will bring $1.49 into sight and then the next level of support will be the $1.4855 area.

Euro creeps higher
Even though Greece’s debt repayments are looming the single currency is moving higher, but this is partially driven by a decline in the dollar.

As I previously commented, Athens has to make good on two repayments to the International Monetary Fund in the few next weeks. The political rhetoric of Greece hasn’t changed much, but the eurozone meeting on Friday will shed some light on the situation. The Syriza party came to power with the pledge to roll back austerity and renegotiate the country’s bailout package, but if they do buckle to their creditors, we could have a change of government in the coming months.

EUR/USD is receiving support from the 100-hour moving average of $1.0745. The resistance at $1.08 is the upside target, and a move through that mark will put $1.0848 (last week’s high) on the radar. To the downside, $1.07 is the initial target and a move below that will bring the 200-hour MA at $1.0680 into play, and if that metric is punctured $1.06 will be the next level to watch. 

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