Technical FX Forecasts: Pound Sterling (GBP), US Dollar (USD) and Euro (EUR) - What Lies Ahead?

The big issue at present is a the switch in fortunes for the pound sterling complex which is looking decidedly more bearish at the present time.

The euro has enjoyed a bounce and we question whether this can extend while the USD is widely tipped to dominate.

For reference, at the time of writing we see:

• The euro to dollar exchange rate (EUR/USD) is 0.35 pct lower @ 1.3314.
• The euro to pound exchange rate (EUR/GBP) is 0.33 pct higher @ 0.8016.
• The pound to dollar exchange rate (GBP/USD) is 0.67 pct lower @ 1.6613.

Please Note: All quotes here are taken from the wholesale markets. Your bank will affix a spread at their own discretion. However, an independent FX provider will guarantee to undercut your bank's offer, thereby delivering up to 5% more FX.

Pound Dollar Exchange Rate Forecast: GBP/USD Faces Inflation Data Danger

The biggest loser in G10 space over the past week was the GBP, which fell by -0.48% against the USD.  However, Monday morning is witnessing fresh buying action confirming the currency should by no means be written off.

"Sterling was negatively impacted by BoE Governor Carney’s presentation of the Bank’s quarterly Inflation Report. The presentation was more dovish than the market had grown to expect based on recent BoE speeches," says Stephen Gallo at BMO Capital Markets.

However there are inflation numbers that could hit GBP/USD yet lower says Gallo.

"The tone for the GBP has shifted significantly in the last couple of weeks as the market has shifted from bullish to bearish. We expect offers beneath 1.6750 to cap GBPUSD ahead of the July CPI report due on Tuesday. Headline CPI is expected to show a fall of 0.2% MoM."

In addition to inflation data markets will be watching for the release of the August MPC Minutes, due for release on Wednesday.

"Our strategy for next week would be to look through any upside surprises in the data or a ‘hawkish’ set of Minutes. We would avoid being long GBPUSD above 1.6750 for the time being," says Gallo.

Euro to Pound Exchange Rate Forecast: EUR/GBP Could Head Higher in the Near-Term

ICN Financial tell us that the outlook favours the EUR in the near term, "the outlook is positive above 0.7985, risk-limit is above 0.7915."

The pair completed the Inverted Head and Shoulders Pattern as showing on the graph confirming the positive trading intraday, "waiting to visit 0.8065 then 0.8145 mainly. Stochastic supports the bullish expectations that remains valid unless the pair breaks 0.7915 then 0.7860," say ICN.

Euro to Dollar Forecast: Awaiting Signals

Concerning the euro dollar, ICN say they are neutral for now. This view is not surprising when we note the recent strength shown by the shared currency.

However, the longer-term picture is bearish for the currency, hence "we prefer to remain neutral waiting for new confirmation signal," say ICN.

Furthermore, "to benefit from stabilising above 1.3330 without confirming breaching 1.3375, its possible to buy around 1.3350 targeting 1.3400 and 1.3425 and 1.3475, stop-loss below 1.3310.

"The bullish attempts during the past two days failed, whereas the upper shadows traded above the resistance 1.3375, but closed the four-hour candles below 1.3375.

"Meanwhile, 1.3330 remained stable in front of the bearish attempts, and breaking this level is significant to cancel the positive expectations that require stabilising above 1.3375 with a four-hour closing, or breaching 1.3400 - 1.3420. Hence, we remain neutral intraday today waiting for confirmation signals."