EUR/GBP extends decline towards key support
James Chen November 11, 2015 8:45 PM
<p>EUR/GBP extended its recent decline on Wednesday as the pound surged while the euro remained in a tight trading range. UK employment data came out […]</p>
EUR/GBP extended its recent decline on Wednesday as the pound surged while the euro remained in a tight trading range. UK employment data came out on Wednesday morning, showing that the unemployment rate for the third quarter of this year declined to 5.3%, the lowest rate in seven years. This helped to prop up the pound against other major currencies, including the euro.
While the Bank of England (BOE) is generally expected to begin raising interest rates sometime next year, the European Central Bank (ECB) has lately been increasingly dovish, indicating a willingness to extend its stimulus measures in the form of further quantitative easing. This relative divergence in monetary policy between the BOE and ECB could likely lead to more downside for EUR/GBP.
From a technical perspective, EUR/GBP is entrenched in a clear downtrend on both a long-term and short-term basis. Longer-term, the currency pair has continued to trade below a key downtrend line extending back more than two years to the August 2013 high around 0.8765 resistance. Shorter-term, EUR/GBP has fallen consistently since its most recent retest of that trend line just a month ago in mid-October.
During the course of this slide within the past month, the currency pair broke down below several different support factors, including a key uptrend support line, both the 50-day and 200-day moving averages, and a major support/resistance level at 0.7200. After the breakdown below 0.7200, EUR/GBP rose back up to retest that level last week as resistance before continuing its retreat to the current lows below 0.7100.
Now trading well below its 200-day moving average, EUR/GBP’s outlook continues to be bearish, with downside targets at both the key 0.7000 psychological support level as well as July’s multi-year low of 0.6935.
GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.