GBP/USD Eyes sub-$1.1750 as the EUR Flounders Below Parity

It is a quiet day ahead for the pound. There are no UK economic indicators for the markets to consider. The lack of stats will leave the pound in the hands of market risk sentiment.

On Tuesday, weak US service sector PMI numbers delivered GBP/USD support. However, demand for the dollar could rise should today’s US stats disappoint, over the fears of a global recession.

From the Bank of England, there are no scheduled Monetary Policy Committee member speeches to provide direction, leaving the pound exposed to any chatter with the media.

For the EUR, it is also a quiet day ahead on the economic calendar. There are no stats from the Eurozone to consider. While the August PMI numbers came in better than expected, Eurozone economic uncertainty lingers.

The ongoing uncertainty will continue to question the ECB’s wriggle room to tame inflation that may limit any upside for the EUR/USD pair.

A lack of stats and ECB monetary policy uncertainty will leave the EUR/USD in the hands of market risk sentiment and ECB member chatter.

GBP/USD Price Action

At the time of writing, the pound was down 0.02% to $1.18267.

A mixed start to the day saw the pound rise to an early high of $1.18380 before falling to a low of $1.17989.

Technical Indicators

The pound needs to avoid the $1.1808 pivot to target the First Major Resistance Level (R1) at $1.1899.

Following Tuesday’s bullish session, a pickup in market risk sentiment would support a breakout from the Tuesday high of $.1.18781.

In the event of an extended rally, the GBP/USD pair could test the Second Major Resistance Level (R2) at $1.1969 and resistance at $1.20.

The Third Major Resistance Level (R3) sits at $1.2130.

A fall through the pivot would see the Pound test the First Major Support Level (S1) at $1.1738 and support at $1.17.

Barring a ‘risk-aversion’ fueled asset sell-off, the GBP/USD should avoid the Second Major Support Level (S2) at $1.1647.

The Third Major Support Level (S3) sits at $1.1486.

Looking at the EMAs and the 4-hourly chart, the EMAs send a bearish signal. The GBP/USD sits below the 50-day EMA, currently at $1.19329.

Following last Thursday’s bearish cross, the 50-day pulled back from the 100-day EMA, with the 100-day EMA falling back from the 200-day EMA, delivering bearish signals. A further 50-day EMA pullback from the 100-day EMA would bring support levels into play.

However, a GBP/USD move through R1 (1.1899) would give the bulls a run at the 50-day EMA ($1.19329) and R2 ($1.1969).

EUR/USD Price Action

At the time of writing, the EUR was down 0.17% to $0.99508.

A mixed start to the day saw the EUR/USD rise to an early high of $0.99734 before falling to a low of $0.99347.

Technical Indicators

The EUR/USD needs to move through the $0.9962 pivot to target the First Major Resistance Level (R1) at $1.0024.

A pickup in market risk appetite would support a breakout from the Tuesday high of $1.00182

In the event of an extended rally, the EUR/USD pair could test the Second Major Resistance Level (R2) at $1.0080 and resistance at $1.010.

The Third Major Resistance Level (R3) sits at $1.0199.

Failure to move through the pivot would see the EUR/USD test the First Major Support Level (S1) at $0.9906 and support at $0.99.

Positive US core durable goods orders would bring the Second Major Support Level (S2) at $0.9844 into play.

The Third Major Support Level (S3) sits at $0.9725.

Looking at the EMAs and the 4-hourly chart, the EMAs send a bearish signal. Following last week’s bearish cross, the EUR/USD sits below the 50-day EMA, currently at $1.00753. The 50-day and the 100-day EMAs pulled back from the 200-day EMA, delivering bearish signals.

A break-through R1 ($1.0024) would support a run at the 50-day EMA ($1.00753) and R2 ($1.0080).

However, a further pullback from the 50-day EMA would bring the Major Support Levels and sub-$0.99 in play.

The US Session

It is a relatively busy day ahead on the US economic calendar. Following the disappointing survey-based service sector numbers for August, the market focus turns to core durable goods and durable goods orders for July.

Better-than-forecasted numbers would support a dollar rebound and a DXY return to 109.

The markets will also need to consider any FOMC member chatter ahead of the Jackson Hole Symposium, which is the key area of focus for the week.