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Trading Outlook – EUR/GBP

Jarratt Davis
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Originally updated: 07:00

Trading Bias: SHORT

Currency pair: EUR/GBP

Current Sentiment: Bearish

In today’s trading session we will be focussing on selling opportunities on the EUR/GBP.

Fundamentals:

Today we have German Zew Economic Sentiment at 10am, we are expecting this figure to come out as positive which will support the EUR – however we have to look at previous readings to fully understand what is going on and what this data point measures, this data was continually weakening until we got ECB QE. Essentially the sentiment is now positive because of the scope of the ECB’s QE programme consumers believe it will inject some momentum into the economy and spur growth as such for this figure to show continued improvement is reliant on a weaker EUR, therefore we want to be selling into any notable EUR rallies as the longer term direction is down.

On the Calendar we also have UK CPI, this is expected to come out weaker with the BoE openly admitting that inflation will continue to fall and possibly fall into negative territory. However they have been very resolute in their commentary to the market that it is not if concern and they are focusing on wage growth and labour data which has all been stellar and the BoE have recently revised their growth expectations to the upside. As such any GBP dips we want to be buying back as they are the next central bank still in line to hike rates after the Fed whilst the majority of their counter parts cut rates.

Technicals:

We expect this pair to sell off during today’s session.

There is strong resistance at 0.74190-0.74230 which could provide trading opportunities should the price pull back. Look for the price to bounce off this level if it retraces back to it.

Remember to be aware of intra-day news as this can very often change the sentiment which makes our trade weaker. Look for any news that could be positive for this pair (think Greece & EU reach bailout agreement), which would change the sentiment to bullish.

Other Market Moving News:

The overnight notable performer was the AUD after the RBA failed to give any mention of time scale for further rate cuts in last night’s Monetary Policy Meeting Minutes.

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