We finally got a decent break out from the channel back on the 13th/14th August and despite a pop back above in the latter part of the month it’s been all down hill since then.
EUR/GBP daily chart 2 September 2013
I last analysed the cross back on the 15th August and back then we had just had the decent GDP figures and I felt EUR/USD was lagging. That proved to be the case and we got the ride from 1.3200 up to the 1.34’s which carried EUR/GBP up from the lows at 0.8507 through to 0.8650. The Euro’s failure at holding above 1.34 and the news headlines saw the major drop and carry the cross with it as cable remained fairly well bid.
We’ve fallen down below a long term support line from July 2012 through Nov 2012 at 0.8508, the July 2013 lows, and are holding around the June lows in the 0.8470 area. Mike has highlighted bids around here and they’ve held up so far. We also have the 200 dma at 0.8478 which we’ve bounced back above from the lows today. The last time we touched the 200 dma was back in December. The level should provide some decent support here if the euro holds up against the dollar.
However we are also below the 200 wma at 0.8493 and a close below here this week will paint a fairly strong bearish picture.
EUR/GBP weekly chart 02 September 2013
Below that we have the 38.2 fib of the Jul 2012/Feb 2013 lo/hi at 0.8410. Although we’ve breached the level back in April and May we held up at the big figure at 0.8400 with only a brief dip below. I would expect this area tp provide some decent support on a move lower.
Up above should expect selling at t 0.8500 and the broken support line at 0.8508. Given that there’s not much space between that and the 200 dma it won’t be long before we get confirmation of which direct to take from here. The deciding factor will be EUR/USD which is still looking quite weak compared to GBP/USD and so will likely keep the pressure to the downside.
The risk this week is from UK and European data and rate announcements, and while there’s unlikely to be a move on rates all eyes will be on Draghi and the presser where we’ll be watching to see what the ECB’s says about the next direction for rates. If UK data continues its strong run (which it has again today) then cable is going to be well bid and EUR/GBP well offered.
My view is that we will see the cross lower this week and it won’t be long before the 200 dma is well broken. We could see it as low as 0.8400 and I would likely offload somemore of my core shorts while taking an intraday long.
