Following Monday's late retreat from higher levels, both the GBP/USD and the EUR/USD pairs traded in a narrow band during Asian session as investors now look forward to the much awaited monetary policy meetings of the US Federal Reserve and the Bank of Japan, which is expected to trigger a fresh bout of volatility in the currency market.

On Monday, the greenback reversed part of Friday's strong gains led by sharper-than-expected rise in US consumer prices on fading expectations of any action from the Fed this week. The US Dollar, however, managed to pare losses as traders continue to readjust their positions ahead of the rate decision. The GBP/USD pair was capped below 1.3100 handle, while the EUR/USD pair faced rejection at 1.1200 round figure mark.

As for today, German PPI will be released during European session on Wednesday and the US economic docket features the release of housing starts and building permits.

Technical outlook

GBP/USD

Following Friday’s sharp sell-off, the pair failed to register any meaningful recovery and move back above 1.3100 handle, indicates further selling pressure is likely to emerge if it breaks below 1.3000 psychological mark. Below 1.3000 handle the pair is likely to accelerate the slide immediately towards a short-term ascending trend-line support, extending from July low through low touched in August, currently near 1.2915 area.

On the flip side, 1.3100 round figure mark now becomes immediate resistance to watch for. On a sustained recovery back above this immediate resistance, the recovery is likely to get extended towards 1.3185-90 strong horizontal resistance. A follow through buying interest above 1.3185-90 resistance would negate any near-term bearish bias and assist the pair to continue scaling higher in the near-term.

EUR/USD

After repeated failed attempts to sustain its move above 1.1250-60 resistance area, the pair on Friday finally broke through 100-day SMA and retested the very important 200-day SMA support. Monday’s recovery faced rejection at 100-day SMA, which now seems to confirm immediate strong resistance around 1.1200 handle. A sustained move back above 100-day SMA resistance, leading to a subsequent strength above 1.1250-60 resistance, might now trigger a fresh leg of up-move that could lift the pair immediately towards 1.1300 handle also coinciding with a short-term descending trend-line resistance.

Meanwhile on the downside, 200-day SMA near 1.1150 region remains immediate support to defend. Failure to hold this important support, and a subsequent drop below late August lows support near 1.1125 area, is likely to accelerate the slide towards and intermediate support near 1.1050 region before the pair eventually breaks below 1.1000 psychological mark and head towards testing post-Brexit low support near 1.0950 level.