Among euro crosses, EURGBP is the only pocket filled with gains monthly. The cross rallied over 3.50% from recent lows, as pound depreciate after cross-party Brexit talks collapse.
Now Brexit will continue to drive the GBP and its hard to believe GBP outperform in the near-term. Again Brexit uncertainty could damper the GBP sentiment.
In terms of macro-economic data from last week, the UK unemployment rate lower from October to December 1974.
The UK unemployment rate was estimated at 3.8%; it has not been lower since October to December 1974, according to the official data. The ONS also reported Average weekly earnings for employees in Great Britain were estimated to have increased by 3.2%.
Looking at the week ahead, it’s a reasonably busy week for data highlighted by that April CPI (Wed) and Retail sales (Fri).
Away from the data, now focus remains on the European Parliament election, which will take place from May 23-26.
Danske Bank said “In the UK, the most important event next week is the European Elections on Thursday. Normally, this would not be a market mover but, given Brexit, it is more interesting this time, not least because the Conservative Party is likely to suffer a heavy defeat and Nigel Farage’s new Brexit party may be the biggest party of all. In our view, it is likely this would increase pressure on Prime Minister Theresa May to resign.”
The heavy calendar of event risks and data releases still on top for this week could provide a meaningful resistance for EURGBP. We think the onus is now on the GBP to perform on its own merits.
We would be concerned if EURGBP could not push and hold above 0.8800-0.8835 resistance zone over the next two or three days. Traders need to see what the European Parliament election could play out before selling the euro cross.
With the recent stellar rally and the nearly overbought daily indicators could cap the price this week. Support at the 100MA has held firm in past weeks keeping momentum in favor of upside; however, rallies have been sold. Note that, only a weekly close above 0.8840 could extend the rally to 0.8900 and 0.8930 levels.
Supports located at 0.8750-0.8730 below here 0.8680-0.8660 exists
It is important to always keep in mind the risks involved in trading with leveraged instruments.
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