Traders Focusing on GBP Volatility in the Hours Ahead

17.10.14

Traders Focusing on GBP Volatility in the Hours Ahead

EUR/JPY

EURJPY Short-term Pullback | Downward Trend Intact

EURJPY has been drifting lower, although it appears to be finding support around the 135.00 major psychological level. The retracement appears to have found resistance at the 136.00 major psychological resistance, which could keep further gains in check.

A return in selling pressure could lead to a drop to the 135.00 support zone, with a potential downside break if bears are strong enough. Data from the euro zone has been weak as usual, with Draghi expected to emphasize the ECB’s openness for further easing in his upcoming testimonies.

Further losses for EURJPY could lead to a drop to the next psychological mark at 134.00 and 133.00. Stochastic is in the overbought area though, indicating that the recent correction might not be over just yet. However, the path of least resistance is to the downside, given the weakness in risk appetite so far.

In that case, a higher pullback could lead to a test of the 137.00 area of interest, which has acted as support in the past. Further rallies past this area could mean a reversal from the recent downtrend and the start of a trend higher for EURJPY, possibly until the previous highs at the 140.00 major psychological level.

GBP/AUD

GBPAUD Testing Key Support | Potential Bounce from 1.8200

GBPAUD is currently finding a floor at the 1.8200 major psychological level after a strong selloff recently. A bounce from this region could mean a quick retracement or a total reversal from the recent downtrend.

Stochastic is indicating oversold conditions, which confirms the likelihood of a bounce. If that happens, GBPAUD could rally up to the previous area of interest near the 1.8300 handle, which might act as near-term resistance. Further gains past this area could lead to a move up to 1.8500.

On the other hand, a wave of selling momentum could push for a downside break of 1.8200 and longer-term losses for GBPAUD. Fundamentals seem to favor a downside break for now, as UK inflation data has surprised to the downside and undermined the likelihood of a rate hike next year.

As for Australia, data has been relatively stable, with consumer sentiment and new motor vehicle sales recently showing a rebound. Data from China has been mostly weak though and this could still lead to reduced buying pressure for the Australian dollar.

EUR/GBP

EURGBP Long-Term Downtrend | Descending Trend Line Pullbac 

EURGBP has recently made a strong bounce because of the weak UK inflation readings. This led to a test of the daily trend line and 100 SMA at the .7950 minor psychological level, with a potential push higher until the .8000 handle.

Further gains past the .8000 mark would suggest that a reversal from the downtrend might take place, which could lead to more long-term gains for the pair. Weak data from the UK could keep buying pressure sustained, although economic weakness in the euro zone could still keep gains in check.

A return of selling pressure could lead to a drop to the previous lows at the .7750 minor psychological mark. Stronger bearish pressure could push EURGBP below .7750 and onto new lows, possibly until the next support area at the .7600 mark.

Data from Germany has mostly been disappointing, as the euro zone’s largest economy doesn’t appear to be immune to the slump in global demand. Consumer and business confidence have weakened, and this downbeat outlook could further weigh on economic activity. More easing efforts from the ECB could push the euro lower against its counterparts in the longer run.