EUR / GBP Price analysis and news
- Low volatility to dampen trading conditions
- EUR/GBP the YTD rises low to test 0.8500
- Preferring the downsides, though, the key revealsrsal increases the risk of correction
Volatility is low, pricing is minimal and, as no significant data has been published in the economic calendar, modest trading conditions are likely to persist at the end of the week. This means that the EUR / GBP has caught my attention with a cross that is currently testing prior support and now resistance at the psychological 0.8500 handle, where weekly closing is closely monitored.
Although my prejudices remain additional downsides for the EUR / GBP, we have seen this episode earlier as the cross saw corrective pricing below the wrong break of 0.8500 seen at the beginning of the second quarter.
The reason for the decline in EUR / GBP is as follows;
- The ranking of the BoE’s exit increases the risk of further interest rate hikes compared to the terrible ECB
- DE / GB bond spreads remain positive for the GBP and thus keep up the pressure on the EUR / GBP
- Low volatility and stable indices favor higher beta currencies compared to preferred funding currencies such as the euro
- Several top levels to keep EUR / GBP upside down
The spread of DE / GB bonds maintains EUR / GBP pressure
Looking at the chart, as mentioned earlier, the main focus is on weekly closing, where a failure to hold a position above the euro / pound sterling above 0.8500 is likely to keep risks down. On the upper side, the short-term resistance is 0.8530, denoting 20DMA, while the further resistance above is at the highest level in August (0.8550-60), which also coincides with 50DMA. Although the cross should close above 50DMA, this is likely to increase the risk that the price measures will be somewhat corrective.
EUR / GBP chart: daily schedule
Strong data to support GBP but unlikely to change BoE policy
Next week, market participants will review the release of UK first-tier data, in particular the job report and inflation data. Now that a change in BoE’s policy is unlikely, given that the BoE is waiting to see the impact on the labor market of the expiry of the redundancy scheme (end of September), the pound is still supported by strong indicators.