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EUR/GBP Price Analysis: Euro subdued ahead of ECB Minutes

EUR/GBP Price Analysis: Euro subdued ahead of ECB Minutes

2020-08-20 11:00:00
Warren Venketas, Markets Writer
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EUR/GBP Price Analysis:

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EUR/GBP EDGES HIGHER DESPITE UK INFLATION DATA

With UK inflation figures coming in higher than forecasted, the uptick in consumer spending and demand for goods has been well received amongst retail and service industries. This comes after an easing of lockdown restrictions which reflected in a variety of areas with clothing, petrol and packaged holidays being highlighted. The higher than expected inflation data did not assist Sterling as the Euro gained roughly 0.5% against the pound since the announcement.

EUR/GBP TECHNICAL ANALYSIS

EUR/GBP: Weekly Chart

EUR/GBP Price Analysis: Euro subdued ahead of ECB Minutes

Chart prepared by Warren Venketas, IG

The weekly chart above shows a multi-year range bound movement beginning in July 2016. The support and resistance zones (blue) currently hold from the 0.8238 (38.2% Fibonacci) level and 0.9514 level respectively – Fibonacci taken from April 2000 low to December 2008 high.

Since mid-May 2020, price action has been ‘dancing’ around the 0.9000 psychological level with no real conviction to push above or below. This could be an opportunity for traders to exploit large movements either side of this level.

EUR/GBP: Daily Chart

EUR/GBP Price Analysis: Euro subdued ahead of ECB Minutes

Chart prepared by Warren Venketas, IG

Price uncertainty on the daily chart above shows in both the 20- and 50-day Moving Averages (MA) and Relative Strength Index (RSI) correspondingly. Recent consolidation around the MA’s may be reaching it’s breaking point with the 20-day MA crossing below the 50-day MA which is suggestive of a near term bearish move. Bears will look for the recent swing low 0.8938 as initial support.

The RSI signals a hesitancy in favor of neither bulls or bears as it flirts with the 50 level (black). EUR/GBP is primed for a catalyst to give traders a long awaited directional bias. For now, traders may look to trade within the range, looking for opportunities around support and resistance zones.

Range traders may look for medium-term upside toward the resistance zone. Recent highs will need to be broken through before price can push further toward topside resistance. These highs show themselves at 0.9148 and 0.9176 marked above.

STAY TUNED FOR THE ECB MONETARY POLICY MEETING ACCOUNTS

The ECB will conduct minutes later today (11:30 GMT) which may see some movement on the pair. Although markets are not expecting any noteworthy surprises from the ECB it would be prudent to keep an eye on proceedings.

EUR/GBP Price Analysis: Euro subdued ahead of ECB Minutes

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SIGNIFICANT EUR/GBP OPTIONS EXPIRY TOMORROW

Large options expiry taking place tomorrow on EUR/GBP. EUR/GBPstrike at 0.9050 (720M)– Source, Refinitiv. As a general rule of thumb, price tends toward strike prices as expiry approaches so look out for possible short-term upside near the 0.9050 level.

EUR/GBP STRATEGY MOVING FORWARD

The long-term outlook does not seem as if price may breakout of the multi-year range however, the shorter-term may give traders something to look forward to with several macroeconomic factors under way. With Brexit discussions resuming and the coronavirus pandemic being potential future price drivers, traders have much to look forward as uncertainty can lead to future opportunities.

Key trading points to consider:

  • Weekly: Support and resistance zones with 0.9000 psychological level key
  • Daily: Monitor MA crossover and RSI momentum indicator
  • ECB data release in a few hours
  • 0.9050 (720M) options expiry tomorrow
  • IGCS data

IG CLIENT SENTIMENT INDEX SUPPORTS RELUCTANCE BETWEEN BULLS AND BEARS

EUR/GBP BULLISH
Data provided by
of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily -5% -4% -4%
Weekly -11% 13% 4%
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IGCS shows retail traders are currently marginally short on EUR/GBP, with 56% of traders currently holding short positions (as of this writing). This points to a mixed signal, which may need a technical or fundamental catalyst to give traders further guidance.

--- Written by Warren Venketas for DailyFX.com

Contact and follow Warren on Twitter: @WVenketas

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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