After the Bank of England monetary policy summary, market participants and economists have downgraded the GBP bullishness. The euro cross again back to the consolidation theme in a narrow range.
At its meeting ending on 9 May 2018, the MPC voted by a majority of 7-2 to maintain Bank Rate at 0.5%. “Wage growth and domestic cost pressures are firming gradually, broadly as expected” reported in the MPC minutes report. The bank also reported, “Hiring intentions have remained strong and, over the past three months, the unemployment rate has fallen slightly further.”
The week ahead market traders are closely watching the employment figures.
We expect the unemployment rate will remain at 4.2% and the average weekly earnings are likely to rise by 2.9 y/y basis vs 2.8%. A solid report could uplift the cable’s range from the key support level.
In the last two weeks, the euro cross has been facing still resistance at 0.8840 above this 0.8870 exists its 50MA (weekly) which coincides with 200MA (daily). Since mid-April, the recent rally has been developing with a higher low and higher high pattern. From a near-term technical perspective, we believe the cross likely to remain sideways with a limited downside. Looking at 0.8720 as a pivotal for the downside which will open to 0.8660 below this 0.8600 exists.
In our base case, the euro cross should face resistance between 0.8860-0.8950 above this 0.9000 exists. As shown in the below chart, the RSI breakout is needed to forecast 0.8950 and 0.9000.
It is important to always keep in mind the risks involved in trading with leveraged instruments.
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