The euro cross closed out the last month above 0.88 mark and 20MA (Monthly), more than 4.50% rally recorded. Among euro crosses, EURGBP was the biggest winner in May triggered a strong rally driven by the GBP underperformance led UK political and Brexit uncertainties.
In terms of macro data from last week, the Gfk consumer climate index sunnier in May, according to the official data. The Overall Index Score in May 2019 is -10; four measures increased, and one stayed the same in May.
Commenting on the data, Joe Staton, Client Strategy Director at GfK, says: “Despite a backdrop of Brexit-related change and complexity, and price rises for most household bills in April, consumers have managed a seasonal spring in their step with a three-point uptick in consumer confidence this month.”
Looking at the week ahead, it will be a busy week with PMI data and UK Prime minister’s resignation on June 07.
Moody’s Analytics said “the prime minister will remain in office until a new leader is chosen, which should happen by mid-July (following two stages of voting). All eyes are on the candidates to replace her. As of now, Boris Johnson and Dominic Raab seem to be favorites—both of them are staunch Brexiteers—but as much as eleven politicians have already announced their candidatures. Most of them are pro-Brexit, which raises the chances of a no-deal Brexit happening in October.”.
The daily RSI is remaining bullish but getting overbought day by day and the oscillator has been bearish. Against this setting, the cross is seen to face resistance at 0.8900 its 161.8fe as suggested by its A-B-C projection analysis.
Note that only a break of 0.8900 would extend the current rally towards 0.8965 early March 2018 high which coincides with 80.0% fib reaction.
Given the mixed technical outlook, caution remains in order, with an eye on the supports between 0.8820-0.8780. A break below these would invalidate the ascending channel in evidence in the daily and weekly charts.
It is important to always keep in mind the risks involved in trading with leveraged instruments.
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