EURGBP extended lower again, whereas it manages to hold the 100MA (Monthly) again the last lifeline to the cross bulls. Every Goliath needs a David; we expect 100MA (Monthly) could be the David.
Prices have managed to hold the range of 0.8275-0.8590. It’s December 2019 high and low. The cross kissed the 0.8300 on the news that Sajid Javid resigned as chancellor. This brought the rate cut pricing back to the screen.
Danske Bank said, “We still expect a rate cut from the Bank of England at the May meeting. Markets currently price about 25% probability of this.”
Daily momentum studies remain oversold, and our bias still for a relief rally. A move above 0.8400 could be the first sign of reversal. Flipside, a monthly close below 0.8275, could eventually push further lower towards 0.8130 and 0.8000-0.7960 levels its 200MA (Monthly).
UK GDP was flat in Quarter 4 2019, as the underlying momentum continued to slow, according to the ONS. UK gross domestic product was flat in Quarter 4 (Oct to Dec) 2019. The subdued performance of the UK economy is in line with the majority of external expectations, including the National Institute of Economic and Social Research and the Bank of England.
Data preview: UK unemployment rate (Tue), CPI (Wed), Retail sales (Thu), and Manufacturing PMI (Fri) will receive some focus. Any negative data prints might raise the rate cut probabilities.
ING: We suspect it is still early to see any post-election rebound in December jobs data (out on Tuesday): in line with consensus, we expect a slowdown in employment growth, and wage growth may also inch lower. Inflation numbers (out on Wednesday) for January should get a boost from higher fuel prices, but we suspect it will not last through the spring.
So far, the price traced out a double bottom around 0.8275 level and managed to hold the 100MA (Monthly). A decisive breakdown and closed below the double bottom mean another 200 pips correction in the coming days.
A monthly close below 0.8275 could eventually push further lower towards 0.8130, and 0.8000-0.7960 levels its 200MA (Monthly).
The weekly indicators are upbeat than daily, suggest that wait and watch approach.
If the price starts to move higher, key resistance levels to watch out for are 0.8385 and 0.8400.
It is important to always keep in mind the risks involved in trading with leveraged instruments.
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