EURGBP is near its breaking point

EUR/GBP is near its breaking point

When the ECB met last week, Christine Lagarde and friends said that the ECB would significantly pick up the pace of bond buying under its Pandemic Emergency Purchase Program (PEPP). This week, the BOE met. Andrew Baily and his gang decided they would leave monetary policy unchanged, keeping bond buying at 875 billion pounds. In Europe, coronavirus cases are entering a “3^rd wave”, as countries and cities are either extending or implementing restrictions and lockdowns. In the UK, schools have reopened and there is a plan of action to reopen the economy. Theoretically, this means that the Euro should be moving lower vs the Pound, as more bond buying and lockdowns should weigh on the Euro.

Learn more about BOE Governor Andrew Bailey

The price action in EUR/GBP on a daily timeframe confirms this view. As a Brexit deal became more and more of a “sure thing” in late December, EUR/GBP began to move lower. On January 13^th the pair broke below the bottom trendline of a symmetrical triangle that the pair has been in since March 2020, and finally halted at support on February 24^th, near 0.8539, and formed a shooting star. EUR/GBP bounced to horizontal resistance near 0.8736 briefly while unwinding an oversold RSI. Price moved lower to the February 24^th lows on March 9^th and has been holding there since. Note the RSI is moving higher, while price remains near the lows. The RSI now has room to move lower (if price moves lower), without moving into oversold territory immediately.

Source: Tradingview, City Index

On a 240-minute timeframe, price has been range bound since March 4^th between 0.8537 and 0.8633. First resistance is at the downward sloping trendline from the February 26^th highs. If price breaks about the trendline, there is a band of resistance between the March 16^th highs of 0.8640 and horizontal resistance near 0.8678. This area includes the 61.8% Fibonacci retracement level from the February 26^th highs to the March 18^th lows, near 0.8655. First support is near the March 18^th lows of 0.8533. Below there, support is at the 127.2% and the 161.8% extension from the February 24^th lows to the February 26^th highs near 0.8485 and 0.8416, respectively. Double bottom horizontal support from late 2020/early 2021 is near 0.8285. (See daily)

Source: Tradingview, City Index

There is a plethora of UK data next week, including Claimant Count, Inflation data, and Retail Sales. If the net result from this data is stronger, EUR/GBP may push below the 0.8533 lows and continue with the longer-term trend.

Learn more about forex trading opportunities.

This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

StoneX Financial Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit www.cityindex.com/en-sg/terms-and-policies for the complete Risk Disclosure Statement.

ALL TRADING INVOLVES RISKS. LOSSES CAN EXCEED DEPOSITS.

City Index is a trading name of StoneX Financial Pte. Ltd. (“SFP”) for the offering of dealing services in Contracts for Differences (“CFD”). SFP holds a Capital Markets Services Licence issued by the Monetary Authority of Singapore for Dealing in Exchange-Traded Derivatives Contracts, Over-the-Counter Derivatives Contracts, and Spot Foreign Exchange Contracts for the Purposes of Leveraged Foreign Exchange Trading. SFP is also both Derivatives Trading and Clearing member of the Singapore Exchange (“SGX”). SFP is a wholly-owned subsidiary of StoneX Group Inc.

The information provided herein is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to invest, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk.

The information does not represent an offer of, or solicitation for, a transaction in any investment product. Any views and opinions expressed may be changed without an update. To understand the risks and costs involved, please visit the section captioned “Important Information” and the “Risk Disclosure Statement”.

The information herein is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation.

StoneX Financial Pte. Ltd. 1 Raffles Place, #18-61, One Raffles Place Tower 2, Singapore 048616. Tel: 6309 1000. Co. Reg. No.: 201130598R.

This advertisement has not been reviewed by the Monetary Authority of Singapore.