Photo - Andreas Zanin
Andreas Zanin
Analysis | January 12, 2021

KTM FX Weekly: One step left and one step right

Three days up and three days down-the trading pattern remains the same for the EURGBP for ages. Nowadays, if you are trading EURGBP, you should exercise lots of patience. Rising COVID cases in England and new comments on the Bank of England’s negative rates are the two factors that impacted the GBP slightly in the past two days.

COVID-19 tally: The global count rises faster, now at 90,436,000 and up +544,000 in one day. We are heading for 100 mln within two weeks mainly because the UK variant is taking off worldwide.

The latest COVID data from the downtown revealed that the new variant of the COVID-19 is highly contagious, and it’s putting NHS under very significant pressure. On Sunday, 46,169 positive cases were recorded across the UK, and on Monday, 55,026 cases were recorded.

Sub-0: Silvana Tenreyro, External Member of the Monetary Policy Committee, Bank of England, impacted the pound slightly. In her speech, she says the UK economy needs more stimulus from the Bank of England, and it’s essential to consider the options of pushing rates into negative.

“The Bank of England began structured engagement with firms on operational considerations regarding the feasibility of negative interest rates. That work is still in progress, and the Bank will report back when it is complete; I do not have anything new to add on this today.”

 Macros: 

  • Final UK Manufacturing PMI at 57.5 three-year high vs. 57.3 expected. Up from 55.6 in November.

Rob Dobson, Director at IHS Markit, said, “The Manufacturing PMI rose to its highest level in over three years in December, mainly reflecting a boost from last-minute preparations before the end of the Brexit transition period.”

  • UK Final Services PMI posted 49.4 in December, up from 47.6 in November but still below the 50.0 no-change thresholds.

Looking ahead, we will get the UK GDP data. The second lockdown was not that strict as the 1st. So, we don’t expect a significant contraction. We focus on the February 4 BOE meeting. Any rate cut speculations could raise the GBP volatility.

 TECHNICAL OVERVIEW

The trading range has been shrunk since late December. The initial range was 0.9300-0.8860, later changed to 0.9230-0.8860, and now it is 0.9100-0.8860. On all these three occasions, the bottom range has been remained sold. A decisive breakdown below 0.8860 is the new beginning towards 0.8700 and 0.8600.

The daily RSI lacks momentum, but the oscillator is indicting a bullish crossover. From a trading perspective, a move above 0.9100 needed to rally towards 0.9200-0.9230 levels.

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

 

Latest Article
Improve your trading with a True ECN Broker
Trading account overview