11 Oct 2013
EUR/GBP is trading higher on dismal UK construction output
FXstreet.com (Athens) – The EUR/GBP smashed its yesterday 5-week high as of 0.8493, trading higher at 0.8498 – just below 0.8500 – in the aftermath of the UK dismal construction data release.
EUR/GBP on the verge of breaking the 0.8500 level; 200-daily MA 0.8520 lies ahead
The EUR/GBP managed to overcome the barrier as of Thursday’s 5-week high (0.8393) moving higher at 0.8498 area after the dismal release of the UK output production regarding the August. As a matter of fact, the sterling slipped immensely after the data reading proved that the UK construction output printed a dismal gain of just 4% on a yearly basis, while the estimations were standing roughly at 5%. However, the cross needs to overcome the crucial harsh resistance of the 200-daily MA (at 0.8520 area) in order to continue to set up a bullish tone. Traders should also take upon consideration that ECB’s Draghi alongside with the other ECB members has clearly stated his intention to maintain loose policy along with concerns for any serious rise in market rates that could choke off budding economic recovery. Precisely, Draghi, who is in the U.S. to attend the annual meetings of the International Monetary Fund and the World Bank, mentioned yesterday at the Economic Club of New York that “policy makers’ pledge to keep interest rates low explicitly allows for cuts in borrowing costs if market volatility resumes.”
Technical outlook on EUR/GBP
Karen Jones, Head Technical Analyst at Commerzbank mentions that the “EUR/GBP EUR/GBP’s correction higher remains in force. The market has eroded the June low at .8470 and is now approaching the 38.2% retracement at .8500 and we suspect that this may well hold the initial
test. This should act as tough resistance and we maintain our bearish bias while capped by .8500. Failure here will leave focus once more on the .8332 September low. Longer term the market has reversed from the top of a 4 year channel and longer term downside targets of .8280/.8155/.7980 have been introduced (Fibonacci retracements of the move up from 2012). Short term loss of the .8332 September low is expected to signal another leg lower is underway.”
EUR/GBP on the verge of breaking the 0.8500 level; 200-daily MA 0.8520 lies ahead
The EUR/GBP managed to overcome the barrier as of Thursday’s 5-week high (0.8393) moving higher at 0.8498 area after the dismal release of the UK output production regarding the August. As a matter of fact, the sterling slipped immensely after the data reading proved that the UK construction output printed a dismal gain of just 4% on a yearly basis, while the estimations were standing roughly at 5%. However, the cross needs to overcome the crucial harsh resistance of the 200-daily MA (at 0.8520 area) in order to continue to set up a bullish tone. Traders should also take upon consideration that ECB’s Draghi alongside with the other ECB members has clearly stated his intention to maintain loose policy along with concerns for any serious rise in market rates that could choke off budding economic recovery. Precisely, Draghi, who is in the U.S. to attend the annual meetings of the International Monetary Fund and the World Bank, mentioned yesterday at the Economic Club of New York that “policy makers’ pledge to keep interest rates low explicitly allows for cuts in borrowing costs if market volatility resumes.”
Technical outlook on EUR/GBP
Karen Jones, Head Technical Analyst at Commerzbank mentions that the “EUR/GBP EUR/GBP’s correction higher remains in force. The market has eroded the June low at .8470 and is now approaching the 38.2% retracement at .8500 and we suspect that this may well hold the initial
test. This should act as tough resistance and we maintain our bearish bias while capped by .8500. Failure here will leave focus once more on the .8332 September low. Longer term the market has reversed from the top of a 4 year channel and longer term downside targets of .8280/.8155/.7980 have been introduced (Fibonacci retracements of the move up from 2012). Short term loss of the .8332 September low is expected to signal another leg lower is underway.”