The heavy calendar of event risks and data releases is still on tap for this week, but we think the onus is now on the EUR to rally on its own merits. We would be more concerned if EURGBP could not push and hold above 0.8500 over the end of this week. Traders may need to see what the CPI and retail data say, and the jobs data play out before chasing a move in EURGBP.
The beaten-down cross well sits above 0.8550 on a daily closing basis. Well, so far, the cross traced out a double bottom pattern like EURUSD and EURJPY. How far it can hold is the key concern in the wake of macros data points due this week.
Except April 2021, the cross has been painting red itself since last October. It means nine out ten months, the price ended lower, except August. Last week the cross briefly fell to as low as 0.8450 but managed to close at 0.8500.
Technical traders are keeping a close eye between 0.8500-0.8400 levels. A breakdown and close below means we are sliding towards the 0.8300-0.8275 range.
Data review:
UK gross domestic product is estimated to have increased by 4.8% in Quarter 2 (Apr to June) 2021, as per the latest ONS data. The latest growth was largely driven by a strong rebound in consumption expenditure as Covid-19 restrictions were gradually lifted. Most of the rapid rise in GDP is due to services output which increased by 5.8% in 2Q while growth in production output was much weaker with 0.5%.
Looking at the real GDP number in Q2, compared to the US during the UK experienced the largest increase in real GDP.
Commenting on the Q2 number Dr. Hande Küçük Deputy Director – Macroeconomic Policy, said, “GDP increased by 4.8 percent in the second quarter of 2021, in line with our GDP tracker a month ago.”
Looking forward into Q3, the current boom is to set slow, as per the NIESR report.
GBP positioning:
We may see some unwinding of those freshly built long positions in the next CFTC positioning report, as the bullish sentiment on the pound eased last week and EUR/GBP climbed back above the 0.8500 level. This week, we see room for EUR/GBP to rejoin a downward-sloping trend below 0.8500, as per ING.
It is important to always keep in mind the risks involved in trading with leveraged instruments.
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