The relative strength index (RSI) indicator has been drafting positive divergence since 24 February 2021. But the price failed to react on the back of vaccine rollout divergence. The new price cap is edged down from 0.8850 to 0.8650.
Finally, the cross breaks down the five-month support and aims at 0.8420 suggested by the range trading pattern.
History repeats itself
As per the available historical monthly chart below, thrice the price recorded six red candles straight and one time for seven months. This month’s closing will be crucial for traders to lean the second, seventh-month downfall or 1st monthly gain.
Supports located at 0.8470 its 100.0fe (daily), 0.8400 it’s 100MA (Monthly), and 0.8250 it’s 161.8 fe (Monthly). Here’s the Weekly cart.
The 38.2% Fibonacci retracement of the entire 2015-2020 bullish trend was truncated on Monday at 0.8525. Overall, the support zone spread between 0.8525-0.8400 levels: flipside, a decisive breakout above 0.8625 needed to confirm the near-term term change.
The pound has been benefiting from the Euro since the vaccine rollout program launched in the UK. Clear evidence is suggesting that the UK has reached the vaccination threshold set by Israel. On the flip side, France went into third nation lockdown for four weeks. The divergent factor supports GBP to EUR in the near term. But we request traders to look past this divergent. EA will benefit post-Brexit in the medium to longer-term than the UK. In this case, we would expect 0.8850.
Macros: Last week, domestic data in the UK brought Q4 2020 GDP number, which witnesses an upward revision of 0.3%, as per the official data.
UK’s GDP is estimated to have increased by 1.3% in Quarter 4 (Oct to Dec) 2020, as per ONS latest report. The latest GDP figure was revised higher from the first estimate of 1%. And IHS Markit cited that UK Manufacturing PMI at a decade high as the growth of output, new orders, and employment gather pace.
Looking at the UK Manufacturing PMI survey, the index rose to a decade-high of 58.9 in March vs. the preliminary estimate of 57.9 and printed above February’s 55.1. As per the official release, it’s the best outcome since February 2011.
Manufacturing output increased for the tenth successive month and at the quickest pace since last November. Upcoming data to watch out for includes services PMI for UK and EA and ECB minutes.
It is important to always keep in mind the risks involved in trading with leveraged instruments.
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