By FXEmpire.com
Shortly, the UK trade balance figures will be released. We don’t have any reason to take a different view from the consensus for this release. This morning’s strong German Q1 growth report in theory might provide an excuse to take some profit on euro short positions.
However, for now, we don’t have to impression that is going to happen. From a UK point of view, markets will look forward for tomorrow’s UK inflation report. We assume that the BoE, in one way or another will keep the door open for a restart of the programme of asset purchases in case growth would stay low further down the road. However, for now this is apparently no big concern for (currency) markets. We stay EUR/GBP negative, but short-term players can still consider partial stop-loss protection to defend positions going into the publication of the inflation report.
Yesterday, the euro crisis remained the key factor for trading almost markets and trading in the EU/GBP cross rate was no exception to this rule. On Friday, there was a limited profit taking move on sterling long positions.
Investors were disappointed as UK eco data raised doubts on the economic performance of the UK economy. However, this issue faded on Monday morning. There were no important eco data in the UK and the storm of the Greek/EMU debt crisis intensified further as there was no progress in the formation of a New Greek government. EUR/GBP changed hands in the 0.8020 area at open of the European markets. The euro was under pressure during the morning session in Europe, but initially EUR/GBP held above the 0.8000 barrier. The sell-off accelerated when US traders came in. EUR/USD and EUR/GBP set both lows for this corrective move. EUR/GBP closed the session at 0.7968, compared to 0.7997 on Friday evening.
From a technical point of view, there is still no indication of a trend reversal, even as the pace of the decline is slowing. Over the previous weeks, the EUR/GBP cross rate dropped below key support levels at 0.8222, 0.8142 and finally last week below the 0.8068 support. This break opened the way for return action to the 0.77 area. (October 2008 lows). The pair is heavily oversold. So, a correction is always possible. For now, we don’t row against the tide and keep our EUR/GBP short position. Short-term players might put partial stop-loss protection in place to shield their position. EUR/GBP regaining the MTMA (13 d, currently at 0.8072) would be a first indication that the pressure on the cross rate is easing. Sustained trading above the 0.8198/8222 area (recent highs) would call off the downside alert.
Originally posted here
