EURGBP remained rangebound with a positive bias last week and now expect to break its 0.8600 resistance. Traders should consider deploying buy on dips strategy for a target of 0.8600 and 0.8700+ levels. We remain to our last week’s bullish forecast.
The market must take out key support at 0.8380 to set the scene for a retracement.
Data review: The UK offered final Services PMI.
At 53.9 in January, up from 50.0 in December, Services PMI Index registered in expansion territory for the first time since last August. The official report said, the latest reading was the highest for 16 months and above the earlier ‘flash’ estimate of 52.9 in January, to signal a solid increase in service sector output.
Data preview: UK GDP will receive some focus. The Q4 GDP will likely be a big event for the GBP. We are penciling the Q4 growth (Oct to Dec) at 0.4% following 0.3% growth in the third quarter and a decline in the second quarter. We would not be surprised if the UK Q4 final GDP figure showed a downtick.
In the third-quarter report, ONS said, “The underlying momentum in the UK economy shows some signs of slowing.”
Moody’s Analytics reported, “We expect growth all but stalled in the three months to December, in line with the peaking of Brexit-related uncertainty prior to the December 12 general elections. “.
The key support level for EURGBP is placed at 0.8430, followed by 0.8380. If the cross manages to move up, key resistance levels to watch out for are 0.8500 and 0.8540.
The euro cross witness selling pressure after two-day consolidation largely weighed down by the euro weakness. The price closed 40 pips or 0.3% lower, at 0.8450. Going ahead, the financial markets would continue to be volatile as it would closely watch the developments over coronavirus and its impact on the global economy.
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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