Eurozone markets are also moving higher, the UK100 is down -0.03% as the pound gains against the EUR and Gilts outperform, with weak house price data undermining sentiment, while a strong data round in the Eurozone and positive leads from Asia supported Eurozone markets from the open. UK house prices fell 0.6% m/m in December, according to the Halifax house price index, Eurozone retail sales jumped 1.45% m/m in November, more than compensating for the -1.1% m/m contraction in October. Still, strong data that ties in with the better than expected ESI economic confidence reading and in particular the marked improvement in consumer confidence in recent months. The renewed rise in the overall ESI is not a total surprise and confirms that the Eurozone economy ended 2017 in buoyant mood.
EURGBP rebounded temporarily back to 0.8868, on the stronger than expected data, with EURUSD getting back above the 1.2000. However, this does not seem to hold for too long today, since the pair failed to break above the 20-period MA in the hourly chart and to cross to the upper Bollinger Bands pattern. The unexpected weakness in German manufacturing orders helped the pair moving lower, while the pound is presenting gains on the Euro since January 4, after the softer than forecast construction PMI data out of the UK, and the weakness in the December manufacturing. However on the back of this behaviour is the BoE MPC’s policy meeting taking place today, where a no change decision is widely anticipated. The BoE will then also publish its latest quarterly inflation report, with updated growth and inflation projections.
Technically, EURGBP after the pick higher on the announcment of the data, it continues traded lower, by extending its lower Bollinger bands and breaking the S1 at 0.8851. Significant is also the fact that the pair formed a rounding Top, as can be observed in the hourly and 4-hour charts. A break of Rounding top’s neckline, will add further Bearish momentum on the pair. The intra-day and Daily momentum indicators have been turning bearish, flagging potential for a sustained correction following the three-week rally. The intraday RSI is at 35, MACD has turned negative, while Stochastic crossed below 20 at oversold area.
Therefore a closing today below the confluence of 20 and 50 Day MA, would affirm shift in directional bias to the downside. Nevertheless, a Short position was taken at EURGBP, at 0.8850. The Targets were set at 0.8830 and 0.8810, with Support at 0.8880 – 0.8890. Target 2 will be triggered based on today’s closing price.
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