Dollar dips as factory orders drop

GBP/USD and EUR/USD are both trading higher as a decline in US factory orders puts the brakes on the greenback’s bull run.

A pound on top a dollar note
Source: Bloomberg

Sterling awaits services figures

The pound has bounced back against the dollar as a combination of strong UK construction figures and disappointing US factory orders gave traders twice the reason to buy against the dollar. GBP/USD has been plagued by downside pressure recently, and traders jumped at the chance to take advantage of the worse-than-expected figures from the US.

At 9.30am (London time) the UK will announce the services PMI report for January, and the market is expecting an increase from 55.8 in December to a reading of 56.6. It is worth noting that the services PMI accounts for over three quarters of the UK economy. The pound will receive some short-term buying should expectations be met.

GBP/USD is currently trading at $1.5152 and resistance will likely be encountered at $1.52. If this level is cleared it will make $1.5265 the target. Should $1.52 hold as resistance then the 200-hour moving average at $1.5080 will be brought into play.

Euro hopes for Greek debt deal

The euro has clawed back a lot of ground versus the dollar as a number EU finance ministers have welcomed the idea of Greece restructuring its debt, but the biggest challenge the Greek finance minister will face is convincing Mario Draghi.

The European Central Bank chief is likely to be resistant to a deal that would link Greece’s interest payments to its economic growth, and this could bring an end to the EUR/USD rally.

The Greek finance minister Yanis Varoukis hopes to give the country some breathing room by raising the short-term debt ceiling, and the market is concerned if it is rejected by the ECB it will spark another round of euro selling. Greece has little bargaining power over the Troika and that is why any gains seen in EUR/USD will be limited.

The $1.15 level is acting as resistance, and if it is held it will bring the downside support of $1.14 into play. Looking to the upside, a break above $1.15 will make yesterday’s high of $1.1535 the target.

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