The euro cross has reaffirmed support since last Friday. The daily RSI has been developing a higher low pattern, and the oscillator is turned bullish, suggesting a relief rally.
The cross has been well supported at 0.8385, traced out a double bottom in recent sessions, and a break below this level may pave the way for further lower prices towards 0.8315-0.8300. However, as long as 0.8385 is a support, we expect a bullish breakout through 0.8600, which could aim at 0.8700+ levels.
The market must take out key support at 0.8380 to set the scene for a retracement.
Data review: The UK offered a BOE policy meeting.
Last week the Bank of England held the interest rates steady, as expected. We forecast a 5-4 vote in favor of rates unchanged, whereas against our expectations, the MPC has voted by a majority of 7-2 to maintain the rate at 0.75%.
In the press release, the bank said, “UK GDP growth is projected to pick up a little in early 2020.” Whereas the statement ended with a dovish tone, “Policy may need to reinforce the expected recovery in UK GDP growth.”
The hawkish vote of 7-2 push the EURGBP to sub-0.8400 levels but still managed to hold the support zone.
Data preview: PMIs for January will receive some focus.
It will be quiet in terms of market-moving data releases, and that will leave investors’ main focus on the Brexit headlines, if any.
The cross continued to rally on Monday, too, with breaking the initial resistance and psychologically key resistance 0.8500 mark. The outlook remains favorable for the cross, which has already rebounded strongly since testing the support at 0.8380 last week.
Technically, the EURGBP formed a positive candle on the daily chart followed by a double bottom pattern. Going forward, the price is aiming at 0.8600 its December 2019 and Jan 2020 high. If the cross continues moving up, key resistance levels to watch put are 0.8700 it’s 200WMA and 0.8770 its 200MA.
Flipside, the market must take out key support at 0.8380 to set the scene for a retracement towards 0.8340 levels. Moreover, the weekly indicators have picked up.
Note that only a break of the 0.8600 barriers would lessen the risks of a dip back to the double bottom at 0.8380.
It is important to always keep in mind the risks involved in trading with leveraged instruments.
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