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Andreas Zanin
Analysis | June 29, 2021

KTM FX Weekly: No change to our short-term outlook

We have had a fantastic sleepy month at EURGBP. I would love to say traders need more patience to get a clear trend. Last week’s bank of England left the stations without significant changes, and now we are hoping Euro Zone CPI could do something to the landscape.

The short-term trend is getting support at 0.8530 its parallel support, but a daily close above 0.8620 its 100MA needed to confirm the trend change. Flipside, a materialistic breakdown below 0.8500 look unlikely at the moment, as the support is contained for now. The daily oscillator confirms the same. If you’re bullish on the pound, then long GBP against the Yen and Frank are the best safe pockets you should look at.

GBP action: After a spectacular run, it seems the pound is taking a breath before making a final push against its peers. Last week’s data points and BoE failed to cheer the GBP bulls.

According to the official release, Flash May UK Services PMI and manufacturing PMI both fell to two months low, but still signaling a solid expansion in service sector activity in line with looser COVID-19 restrictions and growing customer demand.

  • Flash UK Services PMI recorded at 61.7, a 2-month low. Whereas the May final was at 62.9.
  • Flash UK Manufacturing PMI at June 64.2, 2-month low vs. May final: 65.6).

Sit tight: This is the BoE action last week, which eases some heat from the pound, it seems. The MPC voted unanimously to maintain Bank Rate at 0.1%. And the Committee voted by a majority of 8-1 for the Bank of England to continue with its existing UK government bond purchases program.

On an inflation note, the center continues to repeat its stance that the CPI was projected to rise temporarily above the 2% target. The bank also confirmed that the recent surge in CPI inflation was led mainly to developments in energy prices. As these transitory effects faded, conditioned on the market path for interest rates, inflation was expected to return to around 2% in the medium term.

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

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