Dollar Rate Today: Is the GBP overbought against the USD? Where is the EUR/USD headed?

A look at the markets shows a subdued tone to today's trading; this scenario is completely expected in light of the impending ECB interest rate decision and subsequent press conference.

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Is the US dollar oversold against the British pound?

The Bank of England decision has come and gone with no impact on sterling. As expected no decision was announced.

So with no event risk from the BoE on the horizon we can take a look at the currency charts to try and ascertain where the GBP/USD pairing is headed next.

Luc Luyet at MIG Bank has just updated us with a view that GBP is overbought against the USD:

"GBP/USD has successfully tested the support area between 1.5894 and 1.5886 (17/09/2013 low) and has rebounded sharply. The resistance at 1.6119 has thus far held. An hourly support stands at 1.6020.

"In the longer term, prices have thus far failed to break the strong resistance area between 1.6302 (30/04/2012 high) and 1.6381 (see also the long-term declining trendlines). Given the deep overbought conditions, we would be mediumterm cautious on GBP/USD and monitor closely the horizontal range between 1.5894 and 1.6260 (01/10/2013 high)."

For the euro dollar exchange rate it is the ECB that matters

There is no doubt that for currency markets the big event of the week will be the ECB monetary policy decision due later in the hour.

Some analysts believe that given the lacklustre growth and the strong disinflationary trends in the region, the ECB may cut its benchmark lending rate by another 25bp to 0.25%.

"However, the ECB tends to be relatively cautious in its policy actions and Mr. Draghi may choose to wait a bit longer before committing to such a dovish move. With rates already near zero level the ECB may feel that there is little benefit from lowerings them by another 25bps," says Boris Schlossberg at BK Asset Management.

Nevertheless, many in the forex markets believe the ECB should become more accommodative in order to stimulate in the region.

EZ growth is projected to remain negative in 2013 and rise only slightly to just above 1% in 2014.

Meanwhile inflationary pressures are practically non-existent with prices well below the central banks 2% target.

US data ahead

There is of course a slew of data due out of the US which will also driver the dollar rate today.

Annualised quarterly GDP growth is due which is expected to show the US economy grew 2.0% in the third quarter, lower than 2.5% printed in 2Q.

"Indeed, the downward revision in 3Q figures is all but surprising given the deterioration in jobs data since September (we suspect this is due to the sequester) and the 16-day government shutdown in October," says Ipek Ozkardeskaya at Swissquote Research.

Due on Friday, the change in nonfarm payrolls should witness further contraction in October.

Market consensus is 120’000 nonfarm jobs added last month (vs. 148’000 in September). Despite the weakness in jobs data, the Fed’s intention to start tapering its bond purchases by December-January should weigh heavier on bond prices.

The 10-year US treasury yields actually test 2.6775% - Fibonacci 76.4% retracement on May-September rise, if breached should open the way to 2.7563 October peak.