EUR/GBP Price Outlook - Testing Multi-Week Lows as Important Support Levels Breakdown
EUR/GBP Price, News and Analysis:
- EUR/GBP sell-off may stall before pushing lower.
- Retail trade data highlights the bearish sentiment.
- The ECB continues to monitor the Euro.
The ECB President Christine Lagarde and Governing Council member of the ECB, Francois Villeroy de Galhau, have both just reiterated that the central bank is monitoring the euro’s exchange rate/s carefully and that they are committed to the 2% inflation target, in a fresh attempt to jawbone the single currency lower. The ECB will continue to keep monetary policy as loose as possible for as long as possible in an attempt to kick-start an economy that is being ravaged by a second wave of Covid-19 lockdowns.
EUR/GBP is one pair that has shrugged off euro strength in the last 2-3 weeks with the pair breaking below a cluster of moving averages at the start of the week, highlighting the weakness in EUR/GBP. The three simple moving averages are clustered around 0.9010 to 0.9028, compared to a current spot price of 0.8900, and the 20-day sma has just moved below the 200-day sma, a negative short-term indicator. The 50% Fibonacci retracement level of 0.8891 is the next line of support, before an old level of horizontal support around 0.8678. The CCI indicator is showing that the market is oversold and this may temper any sell-off in the short-term.
Tomorrow sees the release of German full-year growth for 2020 which is forecast at -5.1%, compared to a prior year’s 0.6%, ahead of the minutes of the latest ECB meeting. For all market-moving economic data and events, see the DailyFX Calendar.
EUR/GBP Daily Price Chart (February 2020 – January 13, 2021)
IG Retail trader datashow62.95% of traders are net-long with the ratio of traders long to short at 1.70 to 1. The number of traders net-long is 54.61% higher than yesterday and 67.33% higher from last week, while the number of traders net-short is 23.89% lower than yesterday and 36.39% lower from last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests EUR/GBP prices may continue to fall.Traders are further net-long than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger EUR/GBP-bearish contrarian trading bias.
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