- Focus on BoE meeting
- Interesting support zone: 0.8680-0.8590
Ahead of this week’s Bank of England meeting, we have a cautious view of the EURGBP trading range. Since mid-April, the cross is trading in a narrow range between 0.8680-0.8860 levels. We term this is a consolidation.
The Bank of England expected not to take fresh action in terms of stimulus and a rate cut. Especially after last week’s BOJ, ECB and Fed the market participants and we don’t expect any surprises. This Thursday, Bank of England releases its decision at 7.00 BST.
Moody’s Analytics said, “Chances are that the bank will announce a further increase in its quantitative easing program, though we are not putting our hands in the fire for that.”
In early March, the BoE MPC voted unanimously voted to cut interest rates by 65 bops, from 0.75% to 0.1%, and introduced a Term Funding scheme with additional incentives for Small and Medium-sized Enterprises (TFSME). It has also announced an increase in the stock of asset purchases, financed by the issuance of central bank reserves, by £200 billion to a total of £645 billion, according to official press releases.
Later in the March 25 meeting, the MPC voted unanimously to maintain Bank Rate at 0.1%. The Committee also voted unanimously for the Bank of England to continue with the program of £200 billion of U.K. government bonds and sterling non-financial investment-grade corporate bond purchases, financed by the issuance of central bank reserves, to take the total stock of these purchases to £645 billion, as per official press release.
Data preview: The U.K.’s economic calendar is empty except the BoE meeting, but the focus remains on the latest of the lockdown measures.
The technical picture has not changed for the EURGBP since April 13. 0.8680 and 0.8600 are the two key support levels to focus. The cross had given another bounce lack week, but it could not sustain higher above 50MA. The daily RSI is consolidating after making the most significant mark of 80.80 in March and currently supporting below 50 marks, which suggest a contraction of bearishness under process.
As the below chart depicts, the range trading pricing formation indicates that the euro headed for a break-out higher if trading above 0.8870-0.8900 and is at risk to lower levels if it trades down below 0.8680.
Interesting support zone: 0.8680-0.8590
Since mid-April five times, the price tested the 0.8680 level and held successfully, but unable to perform as capped at the earlier swing high at 0.8865. Meaning a range of trading could break either side.
Gains to above 0.8900 (crunch point) would see the euro cross trading back to 0.8990 levels. Flipside a failure of the EURGBP rate to return to those levels may well see the lower projections in the coming days.
It is important to always keep in mind the risks involved in trading with leveraged instruments.
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