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Andreas Zanin
Analysis | February 23, 2021

 EURGBP follows the same trend as the EURAUD and EURNZD

  • A top remains in place, and the trend stays lower
  • The price goes down, down, and down

 EURGBP follows the same trend as the EURAUD and EURNZD, falling like a dead weight in the sky. 

The euro cross plunged about 5% year-to-date but would need to fall another 5% to erase all of the 2020 gains. According to the weekly chart, 0.8600 is the immediate support, and a decisive breakout down below 0.8600 could open all the way down to 0.8450 levels.

But selling at an 11-month low is not a wise decision even though the downtrend still intact. Look at the daily RSI, trading at 24. This level is not seen since November 2017. On top of this, The weekly price action was down for the fourth week -the last time this was recorded between March -April 2020. Based on this, we remain neutral as there is a chance of a technical rebound in a bearish trend.

Continuation from the last week, At the higher time frame monthly chart, the cross logged four months straight fall, and now we are at fifth. The last time the fall was recorded for six between April-September 2014 and August-December 2019, and four months downfall recorded between December 2014-March 2015. In this case, March 2021 or 1Q closing is the key for the medium term.

As per the analysts, vaccine divergence is the key driver behind the GBP outperformance across the board. Especially among two European currencies, clearly, the pound remains more appealing on UK’s Vaccine outlook. 

Data review:

Last week’s UK economic data was partly encouraging.

  • As per the ONS official data, the Consumer Prices Index rose 0.7% in the 12 months to January 2021, up from 0.6% to December 2020; on a monthly basis, CPI fell by 0.2% in January 2021, following a 0.3% rise in December 2020.
  • In January 2021, retail sales volumes decreased by 8.2% when compared with December 2020, as tighter nationwide coronavirus (COVID-19) restrictions affected sales.
  • Flash UK Services PMI in February at 49.7, 4-month high (Jan final: 39.5).
  • Flash UK Manufacturing PMI February at 54.9, 2-month high (Jan final: 54.1).

 

Looking ahead, we will get UK labor force data. As per IHS Markit, In the UK, the focus is on the labor market, with official data on employment, wages, vacancies, and joblessness released, the latter coming under particular scrutiny amid growing calls to extend the country’s furlough scheme beyond April.

It is important to always keep in mind the risks involved in trading with leveraged instruments.

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