Since the start of April, more than 2% gains recorded in EURGBP before losing some height on Monday. What’s next for EURGBP?
After being rejected at 0.8700 levels, the cross started to give up nearly half of the recent height and settled at 0.8600 on Monday’s closing. The daily RSI is losing momentum, and the oscillator has turned to a bearish crossover. Based on these factors, we focus on the near-term support spread between 0.8540-0.8530 levels. A higher low pattern is much needed to extend the rally to 0.8830. If the price fails to do so, 0.8400 is the next strong support to focus on.
The weekly oscillators are still very upbeat, and weekly volatility has continued to pick up. Under these conditions, the cross can be expected to break out higher above the resistance levels around 0.8720 before eyeing the ones at 0.8830.
We believe bunds have more headroom in the fixed income market than the UK in the next 6month horizon. UK assets have been outperforming EA due to the height of the vaccine rollout success. Now EA vaccine rolls out program started to pick up significantly. So, on a risk-reward basis, EA has more room to grow once the European reopens.
February UK production was overall firmer than analysts’ expectations. As per the ONS official release, industrial production rose 1% m/m, but monthly services grew by 0.2%, which means it was 8.8% below its level in February 2020. GDP grew by 0.4% m/m.
ONS cited in the official release that” All main sectors of GDP remain below their pre-pandemic levels. Still, only services remain notably lower than the initial recovery peak in October 2020 Percentage change in output since the pre-pandemic peak in February 2020 and the initial recovery peak in October 2020.”
As we expected last week, the price action was failed to handle the 0.87 levels and grounded back to 0.86. Any violation of immediate support around 0.8600 may signal further weakness towards 0.8540-0.8530 levels. If the price moving higher, watch out for resistance at 0.8650 and 0.8730. A decisive breakout above 0.8730 could propel forward to 0.8770-0.8800.
It is important to always keep in mind the risks involved in trading with leveraged instruments.
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