EUR/USD, GBP/USD Eyeing Recovery on Low Liquidity Monday Following US Debt Deal

• EUR/USD Bounces Out of Oversold Territory as a Return to 1.0800 Beckons.
• GBP/USD Looking to Capitalize on US Debt Deal as 100-Day MA Provides Support.
• Low Liquidity Expected Today as we Have a Bank Holiday in Both the US and the UK.

What is supposed to be a low liquidity Monday given the bank holiday in the UK and the US has been overshadowed by a tentative deal on the US debt ceiling. We have already seen some moves in the Asian session as risk assets eye a recovery following 2 weeks of growing uncertainty. We can see the effect thus far as the US dollar starts the day as the weakest currency with the Australian Dollar leading the way.

Currency Strength Chart: Strongest – AUD, Weakest – USD.

TECHNICAL OUTLOOK AND FINAL THOUGHTS

It is important to remember that US dollar strength and the recent rally may have started as a result of safe haven appeal, however data over the last week has seen a hawkish repricing of the Federal Reserves Rate Hike probabilities for June and beyond. Given we do have FP this week we could see some form of retracement on the Dollar Index (DXY) ahead of the US Jobs report with a positive print likely to see a resumption in USD buying and a return of US dollar strength later in the week.

EUR/USD DAILY CHART – MAY 29, 2023

From a technical perspective, EURUSD rests on a key level of support around the 1.0700 handle. The bounce in the Asian session has struggled for momentum as the session came to a close with the worry being the lack of liquidity in the London hours could stall any potential recovery in EURUSD.

Given the bank holiday there is a real chance EURUSD remains in a tight range for the rest of the day between the 1.0700 and the daily high around 1.0745. A break of these levels on either side may struggle as well and lack any form of significant follow through.

Key Intraday Levels to Keep an Eye Out For

Resistance levels:

• 1.0745
• 1.0800
• 1.0840

Key support levels:

• 1.0700
• 1.0650
• 1.0600

GBP/USD DAILY CHART – MAY 29, 2023

GBPUSD faces similar challenges to the EURUSD at present following its recent decline. A recovery is overdue as the pair remains in overbought territory at this stage while hovering just above the 100-day MA providing support around the 1.2290 handle. Fridays inverted hammer candle close also hinting at the potential for further upside, however we may not get the explosive upside move until liquidity returns to markets tomorrow.

Key Intraday Levels to Keep an Eye Out For

Resistance levels:

• 1.2372
• 1.2436 (50-day MA)
• 1.2500

Key support levels:

• 1.2290 (100-day MA)
• 1.2250
• 1.2200