EUR/GBP Price Analysis - Sliding Towards Important Support as BoE Policy Update Nears
Euro and British Pound (EUR/GBP) Price, News, and Analysis:
- EUR/GBP unable to break higher and now eyes a recent multi-week low.
- Thursday’s BoE announcement may see the UK bond-buying program slowed.
The latest Bank of England monetary policy announcement tomorrow (Thursday) at 12:00 BST, may well see the central bank discuss ways to slow down the current rate of bond purchases for the rest of the year, giving the meeting a mildly hawkish outlook. The UK’s GBP875 billion bond-buying program is set to expire at the end of the year, but if the central bank continues to buy bonds at a current rate of GBP4.4 billion a week, it will reach its target by the end of August.
While an easing back of its purchases would be more of a mechanical function so the program ran out at the correct date, it would also suggest that the BoE is unlikely to increase its final total further as the UK economy continues to rebound sharply from its pandemic lows. BoE deputy governor Ben Broadbent recently predicted a rapid recovery in growth over the coming quarters, while the UK central bank’s chief economist Andy Haldane said earlier this year that the UK economy is poised like a ‘coiled spring’ with household savings expected to power a spending boom.
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The daily EUR/GBP chart highlights the rangebound nature of the pair over the past month with resistance around 0.8721 tested and rejected repeatedly. The pair has broken below the 20-day simple average, which may now add to downside pressure, and hone in on the 50-day sma, currently at 0.8618. A break below would leave the April 19 low at 0.8588 vulnerable. The CCI indicator is entering oversold territory but it may be unable to help stem a further sell-off if the BoE turns neutral to mildly hawkish.
EUR/GBP Daily Price Chart (September 2020 - May 5, 2021)
IG Retail trader data show51.88% of traders are net-long with the ratio of traders long to short at 1.08 to 1.We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests EUR/GBP prices may continue to fall.
Yet traders are less net-long than yesterday and compared with last week. Recent changes in sentiment warn that the current EUR/GBP price trend may soon reverse higher despite the fact traders remain net-long.
What is your view on EUR/GBP – bullish or bearish?? You can let us know via the form at the end of this piece or you can contact the author via Twitter @nickcawley1.
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