The pound continues to grind higher against the Eur, resulting in a second day fall to 0.8860. Following the colossal rejection at 0.9050, the cross is now finally entering to the near-term support. The series of previous highs and recent swing lows (0.8880-0.8860 and 0.8780) should soon become a support zone. The daily RSI and oscillator are remaining bearish; a pullback is not ruled out.
Lockdown: Since June 1, lockdown measures are now gradually easing across the UK. The next review will take place on June 25. COVID-19 has triggered a global crisis like no other—a global health crisis that, in addition to an enormous human toll, is leading to the deepest global recession since the Second World War.
Advanced economy central banks moved quickly to ease monetary policy in the wake of the pandemic, bringing policy rates in most advanced economies close to or below zero. The Bank of England has begun directly financing government expenditures.
Brexit: The clock is ticking on the June Brexit extension deadline by June 30. The pound has been relentlessly spiking against EUR and USD. Probabilities have mounted for the transition period to be extended beyond June. Whereas Boris Johnson has repeatedly said, he will not ready for an extension to the transition period.
BBC reported that EU negotiator Michel Barnier said: “We have always been open to the possibility of an extension of one or two years – as is possible under the exit agreement. And our door remains open”.
Data review: The COVID-19 pandemic continued to have a severe impact on UK service sector activity in May, despite a boost in some areas from the gradual easing of lockdown measures, according to the IHS Markit.
At 29.0 in May, the UK Services PMI remained well below the 50.0 mark that separates expansion from contraction but rose slightly from the earlier ‘flash’ estimate of 27.8. The latest reading was also up from 13.4 in April, to signal a slower pace of decline than in the previous month, according to IHS Markit.
Data preview: We will see April Manufacturing and Industrial production numbers on Friday.
EURGBP has strong support at 0.8860 and 0.8670; a revisit of 0.8270 levels looks unlikely. We are keeping a close eye on 0.8860 and 0.8670 levels. A fall below 0.8860 can take the cross down further to as much as 0.8700-0.8670 levels. Whereas we do not see the cross revising the March lows. The 20MA (Weekly and Monthly) of the cross is around 0.8750, which should be good support.
If the cross starts moving higher, focus on 0.8930 and 0.9000 levels.
It is important to always keep in mind the risks involved in trading with leveraged instruments.
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