Forex snapshot

The dollar remains the favoured currency once again, with GBP/USD looking precarious above its 200-day moving average and the euro still in retreat following poor economic data.

US dollar and ten pound note
Source: Bloomberg

GBP/USD worryingly close to 200-DMA

This morning’s GDP revision is unlikely to provide much excitement, leaving sterling still struggling with the impact of Mark Carney’s report this week and the unemployment data from Wednesday. Ultimately it seems that interest rate expectations have been noticeably pegged back, thanks to a more dovish than expected Mr Carney and wage growth data that didn’t actually show any growth.

GBP/USD could be approaching a ‘bounce or bust’ moment, given its perilous position barely 0.1% above the 200-DMA. Sterling watchers will look to what happened to EUR/USD when it breached this indicator –  the currency pair hasn’t really looked back.

The $1.6630 level and then $1.6570 would be areas to watch for support should the 200-DMA be lost, but any bounce needs the daily relative strength index to move out of oversold territory to have any hope of rallying.

On the hourly chart the textbook downtrend remains in place, with yesterday’s low around $1.6660 being the area that may provide some support. However, we’ll need to see a move through the major hourly moving averages, together with a turnaround in the hourly RSI, which is busily dropping back from the highs seen yesterday. 

EUR/USD resting near $1.3350 mark

The situation shows no sign of improvement for the beleaguered eurozone, as France declares that it will no longer follow austerity measures at the cost of economic growth. Even Germany is not immune, as data shows last year witnessed a technical recession in Europe’s strongest economy. Additionally, Paul Krugman this morning has warned that Europe will be lucky if it only experiences one ‘lost decade’ of non-existent economic growth.

Next week sees a pile of economic data from France, Germany and the eurozone, mostly consisting of PMI data, but the picture is not likely to improve in any noticeable fashion. Instead, most investors are now betting on European Central Bank quantitative easing at some point this year, as perhaps the only real option open to the eurozone economy, save disaster and breakup.

EUR/USD has come to rest around the $1.3350 mark, its lowest since November 2013, and a rising daily RSI does give some hope that there may be a short-term rally in the currency. Even if this does occur, the 50-DMA is an awfully long way from the current price, and should likely act as significant resistance, as it did twice in July. 

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