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Sterling Strengthens Against Euro, Advance GDP Report Awaited

Daily Forex Market Preview, 26/01/2017

The euro continued its decline against the British pound yesterday, losing over 0.7% by Wednesday's close. The single currency has been maintaining its losing streak against the sterling after earlier on Tuesday, the UK Supreme Court ruled in favor of putting the Article 50 to a parliamentary vote. The UK Government is expected to publish a bill in this regards sometime this week. On the economic front, the focus will shift to the UK's advance GDP estimates for the third quarter today. Economists polled expect to see the fourth quarter GDP rise 0.5%.

EURGBP daily analysis

EURGBP (0.8497): EURGBP has been posting strong declines after the bearish candlestick reversal formed on January 16. Price action has been in a steady decline led by a series of fundamentals with the Brexit process taking precedence. EURGBP closed at 0.8507 yesterday with price action nearing the minor support and a round number level at 0.8500. A strong bearish breakdown here could signal further continuation towards 0.8330 support, which marks the support level of the longer-term head and shoulders pattern.

AUDUSD intra-day analysis

AUDUSD (0.7559): AUDUSD has been showing signs of exhaustion following the strong rally towards 0.7600 this week. The daily Stochastics shows the hidden bearish divergence in play which points to a correction to the downside. On the hourly chart time frame, AUDUSD is posting a reversal with the head and shoulders pattern in play following the reversal near 0.7572. To the downside, watch for the initial support that has formed at the potential neckline of 0.7526 - 0.7521. A breakdown below this will signal further downside towards 0.7481.

EURUSD intra-day analysis

EURUSD (1.0743): EURUSD continues to consolidate below the 1.0765 resistance level, but the downside is likely overdue. Watch for a potential momentum led to break down in prices towards 1.0551 which remains the initial support level that will be tested to the downside. On the 4-hour chart, the Stochastics point to a bearish divergence that is currently forming with price failing to post new highs. In the near term, 1.0700 remains the important support level. A break down below 1.0700 will confirm the downside in prices.