The pound remains under pressure against the USD and been trading down for five straight days. Back in November and December 2019, it was logged six days straight fall. Turning to our subject EURUGBP, it has managed to close above 50MA strongly for the first time since September 2019. We remain bullish on EURGBP as long as 0.8450 supports.
Overnight’s data point raised odds of BOE rate cut, which is not yet priced in.
“Annual growth in UK monthly GDP is now below 0.5% y/y – not seen since the European debt crisis in 2011-13!!” Danske Bank commented post the UK November GDP data.
In the absence of fresh Brexit risk, the GBP could cap the rally in the near term. The GBP is fully priced in the Brexit on 31 January. It is consolidating in the range of 0.8600-0.8450 levels.
The UK offered industrial production, trade, and monthly GDP data. Monthly gross domestic product fell by 0.3% in November 2019, driven by falls in both services and production, according to the official release. This followed the growth of 0.1% in both September and October 2019.
Production fell by 1.2% in the month of November 2019, following growth of 0.4% in October. Within production, manufacturing fell by 1.7%.
The week ahead UK offers December CPI (Wed) and December Retail sales (Fri).
We look to buy EURGBP on dips. We have been advising the same strategy since December 2019 and now aiming at 0.8700 initially followed by 0.8750 levels.
The cross traced out a double bottom on the H4 chart last week, suggest the price might be through the key resistance level seems at 0.8600.
Currently, the cross is trading at 0.8565, approaching interesting resistance here at 0.8590-0.8600. Break above the level would increase the chances of continuing up towards its key moving averages 100MA and 200MA, respectively.
View: Watch how price action develops around 0.8600. Breaks higher opens the potential for 0.8680 and 0.8750 levels.
It is important to always keep in mind the risks involved in trading with leveraged instruments.
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