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Andreas Zanin
Analysis | March 30, 2021

KTM FX Weekly: Expect EURGBP to trade in 0.8400-0.8900 range

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. 

  • Log the Sixth-month downtrend.
  • Weekly RSI at 30, oversold, and the oscillator is about to change to bullish crossover.
  • Daily RSI is suggesting positive divergence in making-matter of time to take off.
  • Past five-week daily trading pattern suggesting bottom is underway.
  • Support zone spread between 0.8500-0.8400.

In summary, all the above factors are pointing limited downside to bullish. We expect EURGBP to find between 0.8500-0.8400 levels while resistance is visible at the 0.8650 marks. 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 long medium-term theme.

Data review:

Likewise, EZ, Flash PMIs data suggested UK signals strong end to the first quarter for economy. As per IHS Market, the UK economy rebounded from two months of decline in March. The headline PMI covering both manufacturing and services rose from 49.6 in February to 56.6 in March.

Besides, data from Labour Force Survey (LFS) show the unemployment rate continued to increase, while the employment rate continued to fall.

  • Flash UK Manufacturing PMI Mar: 57.9, 40-month high (Feb final: 55.1).
  • Flash UK Services PMI Mar: 56.8, 7-month high (Feb final: 49.5).

  • Growth in average total pay for the three months November 2020 to January 2021 increased to 4.8%.
  • The UK unemployment rate, in the three months to January 2021, was estimated at 5.0%, 0.1 percentage points higher than the previous quarter, as per ONS.

Looking ahead, jam-packed week for the UK and EZ. PMIs for UK and EZ, and

TECHNICAL OVERVIEW

The cross is now trading at the major support zone and is developing a double bottom pattern between 0.8530-0.8500. But a decisive breakout through 0.8640 needed to confirm the near-term term change.

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

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