GBPUSD and EURGBP Technical Analysis
- Fundamentals turning mildly positive for Sterling.
- EURGBP looking weak and likely to fall further.
GBPUSD Building a Base
UK PM May will face a no confidence vote later in the session – one that she is fully expected to win - and will face calls from within her party to change her Brexit bill after last night’s humiliating defeat. And with a growing groundswell of MPs saying that they will reject any No Deal Brexit scenarios, Sterling should benefit from this improved sentiment. And with sentiment playing an increasingly important role in trading, especially in the Sterling space, any edge can help. The IG Client Sentiment Data shows how retail traders are positioned and why it matters. Currently retail are 51.4% net-long of GBPUSD, a mildly bearish contrarian set-up. However, daily and weekly changes in the data set suggest that GBPUSD may in fact trend higher.
GBPUSD currently trades around 1.2875 and continues to nudge higher, with the 23.6% Fibonacci retracement level at 1.2894 the first, close, target. Above here the important short-term target is the 200-day moving average at 1.2990, which if broken will see GBPUSD break 1.3000 in quick order, printing a two-month high. Above here, 1.3177 – 38.2% Fibonacci – and 1.3300 come into play and if broken and closed above will add an extra positive momentum to Sterling, breaking a recent pattern of lower highs.
GBPUSD Daily Price Chart (May 2018 – January 16, 2019)
EURGBP Post-Brexit Vote Falls to Continue
EURGBP is under downside pressure from both sides as Sterling sentiment improves and Euro sentiment weakens after ECB President Mario Draghi warned yesterday of the need for further, substantial, stimulus. This warning comes on top of the recent slew of weak eurozone data that has recently weighed on the single currency. The technical set-up is further negative after breaking both the 50% Fibonacci retracement level and the important 200-day moving average. Next support is at 0.8803 – 61.8% Fibonacci – before the October 10 swing-low at 0.8723 and the November 13 swing-low at 0.8655.
EURGBP Daily Price Chart (March 2018 – January 16, 2019)
--- Written by Nick Cawley, Analyst
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