KTM FX Weekly: Bottoming in process?

Week three brought us the latest UK PMI data, and the latest figures suggest the third national lockdown hits service and the manufacturing sector at the start of 2021. Investor confidence has taken a hit slightly. But the current lockdown impact looks far less severe than that seen in the 1st national lockdown.

The anticipation is that rolling out COVID-19 vaccines could show the light at the end of the tunnel in the coming months. Despite the widespread uncertainty, the life return to normal is looking far than it thought.

Joe Staton, GfK’s Client Strategy Director, says: “Despite the widespread anticipation of a ‘return to normal’ with the ramp-up of the vaccination program, it is too early to deliver a jolt in the arm to UK consumer confidence.

Turning to the latest PMI figures services sector saw a steep fall, and manufacturing has seen growth almost stall, blamed on a cocktail of COVID-19 and Brexit, which has led to increasingly widespread supply delays, rising costs, and falling exports.

Duncan Brock, Group Director at CIPS, said, “This is a sudden blow to the UK economy as a recovery in the two sectors lost its momentum after some improvement at the end of last year.”

Data review:

• The Consumer Prices Index 12-month rate was 0.6% in December 2020.
• The UK Consumer confidence decreased two points to -28 in January.
• In December 2020, retail sales volumes increased by 0.3%.
• Flash UK Manufacturing PMI January printed at 52.9, 7-month low (Dec final: 57.5).
• Flash UK Services Business Activity Index January at 38.8, 8-month low (Dec final: 49.4).

Looking ahead, the focus will be upcoming employment numbers.

TECHNICAL OVERVIEW

Following the colossal rejection of 0.8925, we are finally tested and held the major support zone. The series of bottoms in June, August, and November and the 200MA (Weekly) should now become support, and so if you are bullish EURGBP, then this is the zone (0.8860-0.8830) to take a close look.

A move above 0.8930 could propel the cross towards 0.8990-0.9000 initially. Any attempt to bounce towards 0.9000 and 0.9090 could run into resistance in the short-term.

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

What is your Technical View?

Do you have a different idea? Please leave us a comment and get an answer from our professional analysts