The deceleration trend finally enters the support zone. As we noted a couple of times earlier, dip buying is an opportunity with strict stop loss.
In summary, all the above factors are pointing limited downside to bullish. We expect EURGBP to hold the support between 0.8500-0.8400 levels while resistance is visible around 0.8720 levels. Going ahead, wild gyration is expected between the levels.
We are not discounting the fact that GBP is still supportive on the back of vaccine rollover. Beyond that vaccine point, we favor EUR to GBP. This is the base case for our medium-term theme.
Data review:
Last week’s central theme was “Eurozone leads as US and UK growth wanes”.
The eurozone is also benefitting from fewer supply and labor market constraints than the UK and US, where growth slowed sharply due to these shortages, with prices rising commensurately higher as a result.
The eurozone enjoyed the fastest growth of the world’s major economies for a second month running in August, according to the flash PMIs, with growth slowing sharply in both the US and UK while Australia and Japan slipped into deeper downturns, IHS market report last week.
TECHNICAL OVERVIEW
The cross is now trading at the major support zone and is developing a double bottom pattern between 0.8500-0.8450. But a decisive breakout through 0.8600 is needed to confirm the near-term term change. We suspect the cross is developing an inverse H&S pattern on the weekly chart. But it is too early to say this.
It is important to always keep in mind the risks involved in trading with leveraged instruments.
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