GBP/USD Analysis: Inverted head and shoulder in progress ahead of CPI report

GBP/USD Analysis: Inverted head and shoulder in progress ahead of CPI report

The GBP/USD pair fell to a 5.5 year low of 1.4564 on Monday before recovering to 1.4650-1.4680 levels. The Pound was volatile despite the absence of a major market moving data out of the UK or the US. As for today, we have the UK CPI report for March, which could show the headline inflation figure as well as the core inflation figure remained unchanged. In February, the CPI year-on-year had dipped to zero, while the core inflation had eased to 1.2% from 1.4%. The Pound could take another hit today, in case the inflation prints below forecasts. On the other hand, actual figures matching estimates or better-than-expected figures could help GBP/USD rise above 1.47 levels. Moreover, the inflation figure is likely to overshadow the employment number. A weak inflation print, coupled with the drop in employment would be highly bearish for the GBP.

On the hourly charts, we see an inverted head and shoulder formation under progress, with the neckline resistance currently seen at 1.47. We also see bullish RSI divergence on the daily chart. Trading at 1.4656, the pair appears well supported at the hourly 50-MA located at 1.4645. In case the pair, manages to sustain above the same during the early European session, we could see GBP/USD rise to the neckline level of 1.47. A break above the same opens doors for Inverted Head and Shoulder target of 1.4836. However, the immediate gains are likely to be capped around 1.4736 (hourly 100-MA) -1.4750. On the other hand, a break below 1.4634 could see the pair re-test 1.46-1.4564 levels.

EUR/USD: Some stability after six consecutive sessions of losses

The pair fell for the sixth consecutive session on Monday, printing an intraday low of 1.0519, before finishing at 1.0570 levels. Greece issue once again weighed over the shared currency. The losses in the EUR/USD appear capped around 1.05 levels today, even though the data in the Eurozone is expected to show a contraction in the industrial activity in February. Moreover, the pair has fallen sharply ahead of the ECB meeting. Draghi is expected to sound upbeat regarding the recent economic data – especially the PMI surveys. With the ECB’s QE just one-month old, there is no need for the bank to turn more dovish. Thus, losses ahead of the ECB appear to be overdone and the pair could see a correction.

On the charts, we see the pair failed near 1.06 in the Asian session today, after which the EUR was offered once again. At 1.0547, the pair is indicating losses for the seventh straight session, with the daily RSI bearish at 35.26. On the hourly chart, the falling trend line is intact, although the pair is inching loser to a breakout. Given the bearish RSI on the hourly as well as four hourly charts, the immediate gains in the pair could be capped around 1.06-1.0634. Overall the pair is likely to trade in the range of 1.05-1.06 today. A break below 1.05 exposes 1.0461, while the pair may not last long enough above 1.06 levels.