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The recent trade in EuR/GBP has been the battle of the losers as both currencies have given way and the only question facing the market was which one was going to fall further. The euro has come under selling pressure as investors worry about the prospect of further stimulus from ECB due to persistent deflationary pressures. Cable has declined because its G-7 leading economic statistics have slipped a bit from their torrid pace of Q4 of last year. Although UK economy is a clearly doing better than the EZ, the currency market is a relative bet and looking forward if tonight’s UK Services PMI misses its mark, cable could come under renewed selling pressure while euro is likely to remain steady given the decent PPI numbers that will keep ECB policy stationary for now. Therefore EUR/GBP could push higher to 8350.
Technically EUR/GBP is now consolidating and basing after a steep selloff with support coming in at 8160 while resistance is at 8350. If the pair can push higher then the next upside level is 8500 while a break below the year’s lows opens a run towards 8000.