EUR/GBP Bullish Reversal at 61.8% Fibonacci Support Zone

The EUR/GBP has made a key bullish bounce at the 61.8% Fibonacci retracement. This occurred after price action made a breakout above the key resistance trend line (dotted red).

This article will examine whether a long-term bullish reversal can indeed take place on the daily chart.

Price Charts and Technical Analysis

EUR/GBP daily chart

The EUR/GBP daily chart is showing wicks on the bottom of the daily candle. Price action is now testing the 21 ema resistance zone:

  1. A push above the 21 ema zone could indicate a bullish breakout (green arrow).
  2. The first target is the -27.2% Fibonacci level at 0.8658.
  3. A bull flag or pullback after hitting the first target could see price action move up again towards the second target at the -61.8% Fibonacci level at 0.8715.
  4. A break (blue arrow) above the resistance zone (red box) could indicate a larger bullish reversal via a wave 3 (purple) pattern.
  5. A bearish bounce (orange arrow) leaves the window open for an ABC (grey) pattern.

On the 4 hour chart, the EUR/GBP is showing a bullish breakout above the resistance trend lines (red dotted):

  1. Price action seems to have completed a 5 wave pattern (pink) in wave 1 (purple).
  2. A bearish ABC (pink) could have completed wave 2 (pink).
  3. A bearish breakout (red arrows), however, below the support trend line (green) could indicate a deeper wave 2 at the 78.6% Fibonacci level.
  4. A break below the bottom invalidates (red circle) the wave 1-2 (purple) pattern.
  5. A bullish continuation (green arrow) above the current candle indicates an immediate push higher. A small pullback (orange arrow) also could see a push up (green arrow).
  6. A bull flag pattern (grey arrow) could kick start a larger bullish breakout (blue arrow).

Good trading,

Chris Svorcik

The analysis has been done with the indicators and template from the SWAT method (simple wave analysis and trading). For more daily technical and wave analysis and updates, sign-up to our newsletter

For a look at all of today’s economic events, check out our economic calendar.

EUR/GBP Showing Signs of Decline

The EUR is losing vs GBP. The price has made 4 consecutive lower highs and this is the sign of continuation decline. We could see a retest of 0.8580 zone which could be good for positional shorts. Targets are 0.8560 followed by 0.8550 as the main support. If the price breaks 0.8550 watch for 0.8510.

For a look at all of today’s economic events, check out our economic calendar.

Cheers and safe trading,

Nenad

 

Sterling Slips Again Ahead of Vote on New UK Tax

Lawmakers will vote on Prime Minister Boris Johnson’s tax proposals, which raise the overall tax burden to the highest in decades.

The government has said the extra revenue is crucial to pay for health and social care as the country recovers from COVID-19 and after a long period of inadequate funding, and it is expected to pass the new legislation easily.

The pound extended its fall on Tuesday after the announcement. Analysts said higher taxes could slow the economic recovery, but more importantly for the pound may ease pressure on the Bank of England to begin tightening monetary policy.

By 0800 GMT, sterling was 0.1% lower at $1.3767. Against the euro the pound dropped by a similar magnitude to 85.95 pence.

The British currency on Tuesday hit its weakest versus the euro since late July.

“The higher taxes on employee earnings and employer wage costs could dampen the strength of the economic recovery from the pandemic in the coming years,” said MUFG analysts in a note.

“There is a risk higher taxes will undermine household consumption and hiring by businesses. At the same time fiscal tightening will ease the need for the BoE to tighten monetary policy.”

“The pound has strengthened so far this year on the back of rising UK rates but further gains in the coming months are likely to prove more challenging,” they added.

“It will be difficult for GBP/USD break above resistance at 1.4000 and for EUR/GBP to break below support at 0.8500.”

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Tommy Wilkes; Editing by Jan Harvey)

Sterling Driven Higher by Dollar Weakness, Still Stuck Below $1.38

So far this week, the pound has been propelled by moves in other currencies, in the absence of UK-specific data releases or Bank of England speakers.

The dollar was close to its weakest in nearly one month, after U.S. ADP payroll numbers were lower than expected.

Currency markets were generally quiet in the Asian session, as investors waited for U.S. non-farm payrolls data due on Friday. Job numbers are being closely watched because the U.S. Federal Reserve has said that the recovery in employment would determine the timing of tapering asset purchases.

At 08:02 GMT, the pound was up 0.2% against the dollar, at $1.37885. On Tuesday, it briefly crossed the $1.38 level, but on Wednesday it did not go higher than $1.37995.

Versus the euro, the pound was up around 0.1% at 85.92 pence per euro.

FX analysts at ING said the 0.8600 level for euro-sterling provides resistance.

“A break above that level could see the pair staying supported for a bit longer, but currently we do not see a strong case for GBP weakness and therefore for an extended rally in the pair.”

Earlier this year, the speed of Britain’s COVID-19 vaccination programme and a broader reflation trade in global markets made the pound the best performer among its G10 currency peers, but it has since lost that lead.

The euro has strengthened against the pound by around 1.5% in the last two weeks – a move which Rabobank senior FX analyst Jane Foley said is more due to sterling weakness than euro strength.

“Recent UK economic data have brought some mixed message on confidence…Better UK economic data will likely be needed to put EUR/GBP back on course for our 0.84 year-end target,” Foley wrote in a note to clients.

Investors are also watching the UK’s COVID-19 infection data. In the last week of August, Britain reported the highest number of new COVID-19 cases in just over a month.

The number of shoppers plying Britain’s high streets, shopping centres and retail parks continued to improve in August, with the gap on the same month in 2019 narrowing to -18.6% from -24.2% in July, according to footfall data compiled by Springboard.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Elizabeth Howcroft; Editing by Mark Heinrich)

Dollar Weakness Pushes Sterling to Two-Week High

At the highly-anticipated Jackson Hole economic conference on Friday, Powell offered no indication about when the central bank planned to cut its asset purchases beyond saying it could be “this year”. The comments knocked the U.S. dollar and pushed up the pound.

Sterling extended these gains on Tuesday as the dollar fell further. At 07:38 GMT, the pound was up 0.3% at $1.3792, its strongest since Aug. 17.

Versus the euro, it was little changed, at 85.76 pence per euro.

Risk appetite was steady, as European stocks shrugged off fresh signs of an economic slowdown in China.

Investors are looking to U.S. jobs figures due later in the week for clues on the timing of the Fed’s monetary policy tapering.

ING FX strategists wrote to clients that a light data calendar in Britain and lack of Bank of England speakers meant that cable had followed euro-dollar’s move higher this week.

“A break above 1.3800 this week should, if anything, be driven solely by USD weakness, while EUR/GBP looks likely to keep trading within its recent narrow range for now,” ING said.

Earlier this year, Britain’s pace of COVID-19 vaccinations and a broader reflation trade in global markets allowed the pound to be the best performer among its G10 currency peers, but it has since lost that lead.

Speculators’ net position on the pound versus the dollar fell further into negative territory in the week to Aug. 24 – meaning there are more bets on the pound falling – according to weekly CFTC positioning data.

The net short position is at its biggest since November 2020.

“The list of headwinds for GBP is growing,” said Nomura analyst Jordan Rochester in a note to clients on Friday, citing rising British COVID-19 infections and “high-frequency growth indications turning lower”.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Elizabeth Howcroft; Editing by Edmund Blair)

Pound Hits Over 1-Week High as Powell Comments Knock Dollar

In prepared remarks for a speech to the Jackson Hole economic conference, Powell signalled the U.S. central bank will remain patient as it tries to nurse the economy back to full employment, repeating that he wants to avoid chasing “transitory” inflation.

The lack of a concrete signal about potential tapering of the central bank’s stimulus programme knocked the dollar lower, helping the pound gain some ground, rising 0.5% to $1.3781. That was its highest level since Aug. 18.

The gains set the pound up for a 1% gain against the dollar this week and its first weekly rise since the end of July.

“It’s more of a dollar move than a GBP one, with the market having taken Powell’s remarks as more dovish than was expected, and ‘selling the fact’ having been positioned for a hawkish speech all week,” said Michael Brown, senior market analyst at Caxton FX.

“I doubt that the jump has much longevity about it, however, particularly with the jobs report next Friday, the UK economy losing momentum faster than the U.S., and attention soon to rapidly shift to the September FOMC (Federal Open Markets Committee).”

External drivers, such as movements in the dollar on the back of risk sentiment in world stock markets, have largely driven sterling in recent weeks.

Earlier this year, Britain’s pace of COVID-19 vaccinations and a broader reflation trade in global markets allowed the pound to be the best performer among its G10 currency peers, but it has since lost that lead as the U.S. Federal Reserve begins to hint towards future tapering of its stimulus.

Hints about future tapering as well as uncertainty over the spreading Delta variant of the coronavirus have in turn dented risk sentiment and fuelled a bid for the dollar.

Against the euro, sterling traded 0.2% higher at 85.65 pence.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Ritvik Carvalho; Editing by Alex Richardson and Emelia Sithole-Matarise)

Pound Dips After Risk-Led Recovery

Sterling has traded largely in line with global risk sentiment in financial markets in recent weeks, tracking the direction of world stock markets higher or lower.

While concerns about the Delta variant of coronavirus have rattled stocks, higher commodity prices have helped put a floor under riskier, growth-correlated currencies, including the pound.

Sterling was 0.4% lower to the dollar at $1.3705 by 17:14 GMT, clinging on to a gain of 1% against the greenback this week.

It was 0.3% lower against the euro at 85.75 pence.

“With no domestic factors currently driving sterling’s movements, GBP/USD has been largely following the risk recovery higher thanks to USD weakness, although EUR/GBP remains quite stuck in its recent range,” ING strategists said in a note.

If the dollar stabilises before the Federal Reserve’s annual symposium in Jackson Hole on Friday, the sterling/dollar rate could struggle to move back above the $1.3800 200-day moving average, they said.

Investors will watch the Wyoming event, attended by prominent central bankers, for further clues on potential tapering by the Fed.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Ritvik Carvalho; Editing by Philippa Fletcher and Mike Harrison)

Sterling Holds Gains vs. Dollar After Risk-Led Rebound

On Tuesday afternoon, sterling was flat against the dollar at $1.3723, holding on to its Monday bounce.

Against the euro, it was also flat at 85.59 pence.

“I think we’re now looking to Powell’s Jackson Hole speech on Friday for the market’s next impetus, though expectations for a hawkish shift do appear to have been dialled back over the last few sessions,” said Michael Brown, senior market analyst at Caxton FX.

Speculators reduced their net long position on the pound in the week up to last Tuesday, CFTC data showed on Friday. This means that speculators are less bullish on the currency than they were earlier.

On Monday, survey data published showing Britain’s post-lockdown economic rebound slowed sharply in August, as companies struggled with unprecedented shortages of staff and materials.

The IHS Markit/CIPS flash composite PMI dropped for the third month in a row, sliding to 55.3 from 59.2 in July – a sharper slowdown than economists had forecast.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Ritvik Carvalho; Editing by Giles Elgood and Alison Williams)

Pound Set For Worst Week in Months as Global Jitters Boost Dollar

Risk currencies such as sterling have taken a knock this week on worries that the Delta coronavirus variant could derail the global recovery, boosting demand for the safe-haven dollar.

Concerns that major central banks such as the U.S. Federal Reserve will begin tapering emergency stimulus just as growth slows has also undermined investor sentiment.

Data released on Friday showed British retail sales unexpectedly fell last month, but analysts said the pound was more likely to be driven by global risk sentiment than by the UK data.

Retail sales volumes dropped by 2.5% in July from June, official data showed. A Reuters poll of economists had pointed to a 0.4% month-on-month increase in July sales.

In the afternoon some calm had returned to markets with stocks recovering and currencies that had sold off largely flat on the day but still down sharply on the week.

The British pound was last trading at $1.3624, having touched a one-month low at $1.3602.

For the week, sterling was down almost 1.8% and set for its biggest fall against the greenback in two months.

Sterling also fell to a one-month low against the euro at 85.82 pence and was marginally lower on the day in later European trading.

It has weakened 0.7% versus the common currency this week, which means it is on track for its biggest weekly drop since early April, Refinitiv data shows.

“With the markets priced for Bank of England action in 2022, certainly the pound will remain vulnerable to an extension of risk-off that starts to result in investors questioning the ability of G10 central banks to raise rates at all,” Derek Halpenny, head of research, global markets EMEA at MUFG, said in a note.

“But we don’t think we are at that juncture yet.”

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Dhara Ranasinghe and Tommy Wilkes; Editing by Gareth Jones and Barbara Lewis)

Sterling Slips as Global Risk Appetite Falters; Speculators Turn Bullish

Data on Friday showing a plunge in U.S. consumer confidence and data on Monday showing a sharp slowdown in China’s factory output and retail sales growth spooked investors, pausing the 10-day winning streak in European stocks.

The dollar edged higher and riskier currencies generally lost out.

The pound was down 0.1% against the dollar, at $1.3853. Versus the euro, it was steady at 85.065 pence per euro.

Against the safe-haven Japanese yen, the pound was down 0.6%, having touched its lowest level in more than three weeks.

As well as being driven by shifts in global risk appetite, a busy week for domestic data is also expected to affect the pound. Focus is on the UK labour market report on Tuesday, inflation data for July on Wednesday and retail sales data on Friday.

Earlier in August the Bank of England set out plans for how it would start to wind down its massive bond-buying programme.

Since then the pound has generally slipped versus the dollar but strengthened slightly versus the euro, as the European Central Bank is not expected to tighten policy as soon as the BoE.

“The recent hawkish tilt by the Bank of England has given the pound an added buoyancy recently, and some decent numbers this week could act as a tailwind for GBP bulls, after recent weakness,” Michael Hewson, chief market analyst at CMC Markets, said in a note to clients.

A Reuters poll found that economists expect the BoE to wait until 2023 before raising rates.

ING strategists wrote in a client note that investors will be looking for how the data this week compares with the BoE’s upbeat growth outlook for the UK.

“EUR/GBP may well find fresh bearish pressure if UK data remain supportive for the pound, and move back below 0.8500,” ING said.

Speculators’ position on the pound turned net long in the week to Aug. 10, according to weekly CFTC positioning data. This means that the speculative market generally expects the pound to strengthen.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Elizabeth Howcroft in London; Editing by Mark Heinrich and Matthew Lewis)

Sterling Little Changed by Britain’s 4.8% GDP Growth in Q2

The Office for National Statistics said the economy grew by 4.8% in the second quarter, in line with a Reuters poll of economists’ quarter-on-quarter expectations.

After the data was released, sterling was little changed and slipped 0.2% versus the dollar at $1.3835 after rising in the previous session, interrupting a 3-day losing streak versus the greenback.

Versus the euro, the pound traded just off 18-month highs touched on Tuesday and was 0.2% lower on the day, changing hands at 84.83 pence.

ING analysts said it was unlikely that the GDP data would “move the needle on the BoE story”.

Stuart Cole, head macro economist at Equiti Capital in London, said that “for sterling, while the economic landscape continues to provide solid support, it does suggest further topside progress will be slow.

“It is quite likely that the pace of growth has already peaked,” he added.

In recent weeks, sterling has outperformed as COVID-19 cases have fallen and high vaccination rates allowed the British government to lift most social-distancing rules.

GBP investors will be looking for direction in forthcoming UK data releases to gauge whether there is risk that the BoE could extend the hawkish element, seen last week, further in the months ahead, said Jane Foley, head of FX strategy at Rabobank.

Analysts said the BoE tone was slightly hawkish last week, when its monetary policy committee voted 7-1 to maintain the pace of its government bond-buying. But they said that “some modest tightening” of monetary policy over the BoE’s three-year forecast period was likely to be necessary.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Joice Alves; Editing by Giles Elgood and Mark Heinrich)

Market Calm Post-US CPI

The dollar is consolidating yesterday’s selloff while stock markets and bond markets have breathed a collective sigh of relief that inflation didn’t accelerate even further. Value-sensitive sectors like materials, industrials and financials outperformed on the day pushing the Dow and S&P500 to fresh record high closes. European bourses had hit multi-year highs yesterday but have opened up mixed so far.

stox50daily_7

Oil rebounds

It was a volatile day in oil markets with prices moving down towards $69 and then up above $71 on various headlines. The US administration heaped pressure on OPEC and its allies to boost supply to tackle rising gasoline prices. The Biden Presidency wants to see Americans “have access to affordable and reliable energy…at the pump”. Of course interestingly, concerns over rising commodity prices are also being voiced by the Chinese authorities.

The current increase by OPEC+ agreed recently of 400k barrels per day is seemingly not enough. But given the uncertainty around the spread of the Delta variant, it seems unlikely that the Saudis and the oil-producing group will want to increase production just yet. The contradictory nature of Biden policies is also being questioned as it urges greener energy while asking foreign producers to open the taps to lower pump prices.

brentdaily_68

UK Q2 GDP in line

Hot off the press, second-quarter UK GDP has just been released in line with the consensus at 4.8% q/q. Growth is expected to slow again this quarter due to the Delta variant putting the brakes on the economy. But economists hope that the UK should still return to pre-pandemic levels by the end of this year.

With the hawkish noises from the Bank of England last week contrasting heavily with the continued dovish stance of the ECB, EUR/GBP has pushed to new 18-month lows. Prices are now consolidating just below the 0.8471 level and bears expect to see more downside, especially as the ECB engineers a weaker currency. A soft weekly close may start to challenge the 2019 and 2020 lows at 0.8281 and below.

eurgbpdaily_120

Written by Han Tan, Market Analyst at FXTM

For more information, please visit: FXTM

Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

UK’s Johnson Urges EU to Consider Post-Brexit Proposals Seriously

Since it completed its exit from the EU at the end of last year, Britain’s ties with the bloc have reached new lows, with both sides accusing each other of acting in bad faith over an agreement for post-Brexit trade with Northern Ireland.

London accuses Brussels of being too purist, or legalistic, in interpreting what the deal means for some goods moving from Britain to its province of Northern Ireland. The EU says it is adhering to the deal, which Johnson signed just last year.

Britain proposed on Wednesday to renegotiate parts of the Northern Ireland protocol that govern the movement of goods such as chilled meats, and to dispense with EU oversight of the accord.

The EU has rejected the demand to renegotiate, with von der Leyen repeating the bloc’s message on Twitter, saying: “The EU will continue to be creative and flexible within the Protocol framework. But we will not renegotiate.”

Johnson spoke to van der Leyen on Thursday.

“The prime minister set out that the way the protocol was currently operating was unsustainable. He said that solutions could not be found through the existing mechanisms of the protocol and that’s why we’d set out proposals for significant changes to it,” Johnson’s spokesman told reporters.

Johnson urged the EU to “look at the proposals seriously and work with the UK on them” saying this would put the UK-EU relationship on a better footing.

Britain drafted the proposals in one paper that it issued on Wednesday to try to force stuttering negotiations forward on making the so-called protocol work better. Some critics say few of the suggestions are new and could largely be dismissed by the EU.

The protocol addresses the biggest conundrum raised by the divorce: how to preserve the delicate peace brought to the province by the U.S.-brokered 1998 Good Friday peace accord – by maintaining an open border – without opening a back door through neighbouring Ireland to the EU’s single market of 450 million people.

It essentially requires checks on goods between the British mainland and Northern Ireland, which remains part of the EU customs area. These have proved burdensome to companies and an anathema to unionists, who are fiercely supportive of the province remaining part of the United Kingdom.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Elizabeth Piper; Editing by Michael Holden and Frances Kerry)

 

Sterling Slips Against Dollar, Heads for Worst Week in a Month

The pound fell 0.3% against the dollar at $1.3805, and was poised for a similar weekly loss, which if sustained would be its worst since mid-June. The U.S. dollar gained 0.1% against a basket of currencies on Friday.

The pound fell slightly against the euro to 85.53 pence, moving further away from 3-1/2-month highs hit earlier this week.

Solid U.S. data and a shift in interest rate expectations after the Federal Reserve in June flagged sooner-than-expected hikes in 2023 have lent support to the greenback in recent weeks.

Against a stronger dollar, the pound struggled to gain ground on the back of growing market speculation that the Bank of England could halt its bond-buying programme early because of an unexpectedly sharp rise in inflation.

Investors were having to balance the prospect of tighter BoE policy, which is supportive for the pound, with concerns about the economic fallout from the rapid spread of the COVID-19 Delta variant and from the end of fiscal support measures such as the job furlough scheme, which will end in September.

“COVID cases are surging and the impact on the economy could prove more considerable than expected,” MUFG analysts wrote in a note. “The job furlough scheme unwind could therefore be more disruptive than expected.”

Market players on Friday said sterling was unlikely to see stellar gains without interest rate hikes, even with an early end to its bond-buying.

“As long as there is no mention of a rapid normalisation of interest rates, only limited sterling strength is justified,” Commerzbank analysts wrote in a note.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Tom Wilson; Editing by Ana Nicolaci da Costa)

 

UK Liable to Pay 47.5 Billion Euros to EU in Post-Brexit Settlement

The report adds that the money is owed under a series of articles which both sides agreed to as part of the Brexit withdrawal agreement. The figure was reported earlier on Thursday by RTÉ News.

The total amount is significantly higher than expected. The UK’s Office for Budget Responsibility (OBR) predicted in its March 2018 economic and fiscal outlook report that the bill would amount to 41.4 billion euros.

An initial amount of 6.8 billion euros is due for payment in 2021, the EU’s consolidated budget report added, with the remainder of the amount to be paid later.

A sum total amount of 47.5 billion euros was mentioned in the report as “net receivable from the UK”.

A trade and cooperation deal between the UK and EU was struck in December after more than four years of acrimonious negotiations and lingering mistrust as Britain ended 47 years of EU membership.

On Tuesday, the European Union urged London to consider a Swiss-style veterinary agreement with Brussels on agri-foods to end a post-Brexit ‘sausage war’ row over certain goods moving between Britain and its province of Northern Ireland.

Tension has mounted over trade arrangements for Northern Ireland, particularly for chilled meats, because the province’s open border with EU member Ireland is Britain’s only land frontier with the EU and its vast single market.

For a look at all of today’s economic events, check out our economic calendar.

($1 = 0.8448 euros)

(Reporting by Kanishka Singh in Bengaluru; Editing by Chizu Nomiyama and Sonya Hepinstall)

 

Euro Drops Like a Rock

Major indices are still pushing higher. Nothing has changed here.

We have a small change on Gold though, where after some time, we finally see a commitment in the bullish camp. The price created the double bottom formation and is heading higher after the breakout of its resistance.

We do not have a lot of trading occasions today but those which are present are pretty strong. Interestingly, all of them have to do with the Euro.

The EURUSD slowly but surely finished the right shoulder of a Head and Shoulders pattern.

The EURGBP is still to dropping after a false bullish breakout from the wedge formation.

The EURNZD has also dropped showcasing the power of a false breakout pattern.

For a look at all of today’s economic events, check out our economic calendar.

USD Is Giving Up the Latest Gains

The SP500 is in all-time-highs. Nothing to see here, let’s move on.

The Dow Jones is inside a flag formation, close to all new all-time-highs.

Gold is possibly trying to create the right shoulder of the inverted Head and Shoulders patterns, but it may only be wishful thinking.

The EURUSD on the other hand is definitely drawing a right shoulder.

The EURCHF is heading higher and aiming for the upper line of the flag, after a bounce from an ultra-strong support.

The GBPUSD is in bouncing from a crucial horizontal resistance, continuing the negative sentiment.

The EURGBP is inside a falling wedge pattern, a breakout to the upside quite probable.

The EURNZD has continued to drop after a false bullish breakout.

The GBPCHF, on the other hand, is in a fresh false breakout pattern with a great potential for a further huge slide.

For a look at all of today’s economic events, check out our economic calendar.

Powell Calms Markets

He repeated the temporary nature of current price pressures and although the recent debate on QE is on the cards, the Fed is nowhere near hiking interest rates. Other Fed officials this week have spread a similar message with New York Fed President Williams warning overnight that the recovery requires more time.

The latest smoke signals from the Fed all point to September as the key meeting when the Fed is most probably able to declare that substantial progress towards their goals has been achieved. This means we should perhaps pencil in the Jackson Hole symposium in August as the precursor to this where Powell really preps the markets.

Stocks certainly gained from the more dovish rhetoric with the tech-laden Nasdaq hitting fresh record highs. The broader S&P500 gained too with only the defensive utilities sector in the red. European bourses have opened up this morning marginally higher after Asian markets posted solid gains.

Dollar holding up for now

After hitting a two-month high at the end of last week, the greenback has suffered two days of losses and given back roughly a third of its sharp gains posted since the FOMC meeting last Wednesday.

Commodity-linked currencies benefitted the most from the more cautious Powell and this may be the case through the summer as those central banks on the hiking cycle see their currencies appreciate the most.

EUR/USD too was helped by markets breathing a sigh of relief, although the 1.20 barrier above is formidable with a confluence of resistance including the 50% retracement level and the 100-day and 200-day simple moving averages below and above.

EUR/GBP moving lower ahead of BoE

We get UK and European PMI data released today and traders will be on the look out for signs that we have seen a peak in manufacturing and a pick up in services due to covid restrictions easing. EUR/GBP also has to contend with the Bank of England meeting tomorrow, which my colleague Han Tan discussed yesterday and the potential for a hawkish surprise.

Perhaps the market read the report as sterling has appreciated against almost every single G10 currency today and EUR/GBP is breaking down through recent support at 0.8542. The downward trendline from the December high has acted as resistance above and bears have their eyes on the cycle low at 0.8472.

By Lukman Otunuga Research Analyst


Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Few FX Pairs Where We Are Still Waiting for a Breakout

First one is the GBPUSD pair, where the price is inside the flag formation, just below crucial long-term highs. Breakout to the upside, will give us a signal to buy.

The USDJPY pair is testing the lower line of the flag. Breakout should activate more sellers.

The EURGBP pair with a descending triangle pattern. Currently aiming its horizontal support.

The EURJPY pair testing the neckline of a big H&S pattern. That can result with a breakout.

The CHFJPY pair with a H&S pattern on a long-term resistance. Possibly an interesting trade for the sellers.

The AUDJPY pair is trying to break the upper line of the triangle but the first attempt looks bad. It is possible that a false breakout is happening right this moment.

The GBPJPY pair showing the beauty of price action. First two pennants and now very clean flag. Breakout to the upside can be a great buy signal.

For a look at all of today’s economic events, check out our economic calendar.

EUR/GBP Bullish Reversal Continues After ABC Bounce at 61.8% Fib

The EUR/GBP made a bullish bounce at the 61.8% Fibonacci retracement level. Is this a confirmation signal of an upcoming bullish reversal?

So far the EUR/GBP is developing a reversal pattern as we analysed in our previous article. This article will review what to expect next.

Price Charts and Technical Analysis

EUR/GBP 16.5.2021 4 hour chart

The EUR/GBP downtrend created a divergence pattern between the bottoms (purple lines). This is usual for a wave 3-4-5 (grey) pattern:

  1. The strong bullish impulse was the next bullish reversal signal (wave 1 pink).
  2. The bearish price action after the impulse was also corrective. A bearish ABC (grey) pattern seems to be unfolding.
  3. The bullish bounce at the 61.8% Fibonacci (green box) and the inverted head and shoulders pattern (green boxes) support the reversal too.
  4. Also, the ABC did not break the bottom of wave 1, which means it could be a wave 2 (pink).
  5. However, a break below the bottom invalidates (red button) the wave 123 (pink) pattern.
  6. A break above the long-term moving averages confirms the uptrend (green arrows).
  7. A bullish bounce at the deeper Fibonacci levels also indicates a potential uptrend (blue arrows).

On the 1 hour chart, we can see a bearish 5 wave pattern (orange) probably completed wave C (grey) of wave 2 (pink):

  1. A break below the bottom invalidates (red button) the bullish reversal and could indicate a deeper pullback on the 4 hour chart.
  2. A break above the 50% Fibonacci level makes an uptrend more likely (blue arrow). In that case, price action is breaking the 50% Fibonacci resistance.
  3. A break below the support trend line (green) could just be a simple pullback if price action respects the Fibonacci level and potential inverted head and shoulders pattern (green boxes).
  4. A bullish bounce (green arrows) could confirm the reversal up.
  5. The bullish price action seems to be completing a 5 wave (grey) leading diagonal in a wave 1 (grey) pattern.

EUR/GBP 16.5.2021 1 hour chart

Good trading,

Chris Svorcik

The analysis has been done with the indicators and template from the SWAT method (simple wave analysis and trading). For more daily technical and wave analysis and updates, sign-up to our newsletter

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