The greenback traded with positive bias against its major counterparts on Wednesday, with the GBP/USD pair reversing part of Tuesday's recovery gains, while the EUR/USD major extending offered tone for the second straight session.
On Tuesday, the GBP/USD pair witnessed a short-covering bounce from its immediate strong support and moved back above 1.3000 psychological mark. Traders ignored stronger-than-expected US data that showed the consumer confidence rose to its highest level since August 2007. Moreover, hawkish comments from Federal Reserve Vice Chairman Stanley Fischer provided little impetus for the US Dollar bulls as market already seem to have ruled out possibilities of a Fed rate hike action in November and hence, focus has now shifted to the upcoming US Presidential elections.
Meanwhile, the EUR/USD pair extended its reversal from 1.1275-80 supply zone and dropped below 1.1200 handle before staging a minor recovery from 100-day SMA support. Currently hovering around 1.1200 region, traders now look forward to US macro and speeches from central bank policymakers.
During European session on Wednesday, comments from BOE Deputy Governor Nemat Shafik might infuse fresh volatility across GBP pair. Later during NA trading session, US economic calendar features the release of durable goods orders. Also in focus would be Fed Chair Janet Yellen’s testimony on supervision and regulation before the Committee on Financial Services and a speech FOMC member James Bullard, which will be followed by ECB President Mario Draghi’s speech about current developments in the Euro area.
Technical outlook
GBP/USD
The pair seems to struggle in building on to recovery move above 1.3000 psychological mark and remained confined within a short-term descending trend-channel formation on 4-hourly chart. Technical indicators have moved into neutral territory and hence, it would be prudent to wait for a break-out momentum before confirming the pair’s next leg of move.
From current levels, the ascending trend-channel resistance near 1.3050 region is likely to hinder further recovery. A convincing strength above this immediate hurdle might trigger a fresh bout of short-covering, lifting the pair immediately towards 1.3100-1.3120 resistance area. A follow-through buying interest would open room for continuation of the pair’s recovery trend in the near-term.
Meanwhile, on the downside, sustained weakness back below 1.3000 mark, leading to a slide below 1.2980-75 support, should now provide the required momentum and drag the pair below a short-term ascending trend-line support, currently near 1.2940-30 region. Below this strong support, the pair is likely to break through 1.2900 handle and head towards testing the trend channel support near 1.2810 region, also coinciding with post-Brexit swing lows.
EUR/USD
Technical indicators are suggesting that the bounce-back from 100-day SMA support could be short-lived. Hence, a sustained weakness back below 1.1200 handle would force the pair to break through 100-day SMA support near 1.1190 region and aim towards testing the very important 200-day SMA support near 1.1160-55 area before eventually dropping to test monthly lows support near 1.1125-20 region.
On the flip side, bullish momentum above 1.1220 immediate resistance could get extended but might continue to face strong resistance near 1.1250 and 1.1270 region. However, a decisive strength above this strong supply zones would negate any near-term bearish bias and the pair should then extend its momentum beyond 1.1300 handle towards testing its next major resistance near 1.1350-55 band.
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