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Greece back underneath the spotlight as warning shots fired by ECB

Accendo Markets
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Sound economic data serenaded the UK economy last week, with the purchasing manager’s index across services, manufacturing and construction presenting strong gains. Manufacturing was helped by cheaper raw materials – nearly all commodity futures are currently in retreat due to weak global demand and cheaper raw materials mean that businesses can slash prices enabling an increase in exports. Construction in particular accounts for over 6% of the UK’s GDP and an expansion in the sector should further boost what is already a strong economy. European Commission forecasts predicted growth in the UK economy at 2.6% this year and 2.4% in 2016.

Such a plethora of positive news has increased speculation that the Bank of England may raise interest rates at their next meeting. While Governor Mark Carney has indicated that inflation may indeed turn negative due to current commodity price lows, he has added that this may be offset by cash-rich consumers with extra disposable income to spend on goods and services. With inflation currently at a 14-year low of 0.5%, and current consensus pointing to the rate remaining as is, all eyes will be on the BoE inflation report due this Thursday (12th Feb).

Greece is back under the spotlight after the left-wing Syriza party came to power last month. PM Alexis Tsipras and his team are standing firm in the face of demands for compliance from their Troika creditors. Warning shots were fired last week in the form of a rejection of Greece’s junk-grade government bonds as loan collateral, meaning Greek banks will need to make use of the Central Bank’s Emergency Liquidity Assistance programme. While Tsipras assures Europe that there will be an agreement between the troubled nation and the Troika, we find ourselves far from banishing thoughts of a Grexit.

The pair entered a strong downtrend before making a bounce off 0.7420. S1 had been a resistance level prior to the break that now sees it acting as potential support (yet to be tested). Additional support may be found at S2 which appears as a weak floor for the pair, having been tested just the once in December 2007.

R1 presents a weak ceiling for the pair, with one test of resistance thus far failing to break out. Further resistance lies at R2, again having been tested once.
Technicals: RSI (Relative Strength Index) and MAs (Moving Averages)

• The 50-day MA and the 200-day MA are trending down, indicating a bearish stance for the pair. Additional resistance may be encountered at the 200-day and 50-day moving averages.
• The RSI is falling towards oversold territory in a continuation of its downward trend.

A short-term bearish outlook presents itself. The UK economy has been shown to be strengthening by recent data. Negative inflation continues to worry, but a possible offset from the demand-side has been suggested by the BoE governor. A decline in UK exports amid falling Eurozone demand remains an ongoing concern as does the continuing standoff between Greece and the Troika, meaning both consumer and business confidence remain shaken up throughout Europe. The outlook for the single currency in all this remains somewhat uncertain.

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Ajay Pankhania is a part-time Technical Analyst at Accendo Markets. You can find out more about CFD Trading with Accendo Markets or download your free research trial, and get access to exclusive trading data. Follow me on Twitter at

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