The EURGBP was more stable to open in the new month after a deceleration trend was seen in October. The second lockdown set up in Europe and the UK, and continuing EU-UK Brexit talks are the key factors that could keep the cross in the current range for some more time.
Second lockdown: Over the weekend, UK Prime Minister Boris Johnson ordered four weeks of COVID lockdown for England as UK passed the milestone of 1million COVID-19 cases.
The UK recorded another 23,254 confirmed coronavirus cases yesterday, bringing the total since the pandemic began to 1,034,914. Last week in the EZ, Germany and French governments too announced lockdowns. As per media sources, the UK is the ninth country to reach the milestone of a million cases after the US, India, Brazil, Russia, France, Spain, Argentina, and Colombia.
Turning to macro, the latest PMIs suggest that UK and EZ final manufacturing PMIs are more positive than expected. UK Manufacturing production (index at 56.4) increased at a much faster pace than service sector activity (index at 52.3). In both sectors, the speed of recovery was the slowest for four months during October, as per IHS Markit.
Looking ahead, we will have a busy week with the Bank of England’s Monetary policy decision for November due to mid-week.
BoE: We and the market are not expecting either a policy change at the November meeting or a change in stimulus stance. We expect the MPC will repeat, “The outlook for the economy remains unusually uncertain.”
At its meeting ending on 16 September 2020, the MPC voted unanimously to maintain Bank Rate at 0.1%. The Committee also voted unanimously for the Bank of England to continue with its existing Quantitative Easing of £745 billion.
Data review: UK manufacturing upturn continues in October despite the further loss of growth momentum.
According to the IHS Markit, UK’s manufacturing PMI fell to 53.7 in October, down from 54.1 in September but above the earlier flash estimate of 53.3. The PMI has remained at an above-50.0 level, signaling expansion, for five months running.
TECHNICAL OVERVIEW
The Euro cross snapped the two-day losing streak and managed to closed neutral on Monday. We observe a formation of lower lows and lower highs on the daily chart, and on top of it the price action also lost the 100MA along with the 50MA. Eventually, focus shifts to the 200MAs.
The medium-term support finds at 0.8960 and 0.8900 its 200MA. Any upside bounce between 61.8-80.0% fib reactions could open a lower high at 0.9100. This upside emerges only after the price is sustained above 0.9050 levels.
The RSI is parked below the equilibrium line to 50 points. The RVI is negative and stationed below its previous swing lows. The setting is negative but not limited downfall expected.
Medium-term: At weekly chart, Golden crossover was spotted the other week. Buying between 61.8 and 80.00% fib reactions offer a better risk-reward ratio with a stop loss below 0.8860.
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