GBP a safehaven currency in Europe

March 2, 2015

GBP a safehaven currency in Europe

Now that EUR is weak due to both economic, geopolitical and Greece related risks Sterling starts to look like a safe haven currency with its economy rebounding. The UK job market is recovering, Industrial activity expanding and GDP at healthy 2.7% level (almost back to its 2007 pre-crisis levels). This creates a stark contrast to the ailing Euro Area but at the same time the risk is one of contagion: Euro Area being so important trading partner to the UK its can impact the growth in the UK negatively. However, the EURGBP pair is in a downtrend and reflects both the stark differences in the economic front and the interest rate hike expectations. The Bank of England is expected to raise rates either in the third or fourth quarter while the ECB is obviously committed to the QE program announced in January.

Price is now bouncing from general region of a 0.7255 support level, a historical pivot high. Stochastics in both weekly and daily timeframes are oversold and there is no divergence in these time frames. Out of major EUR crosses, it is the EURGBP that is the weakest and therefore makes it an ideal market to sell the rallies. The nearest resistance (a weekly low) is at 0.7340.

EURGBP, 240

EURGBP, 240 min

I expected price find support at 0.7255 and it did almost to a pip, rallied and then was sold again from 0.7300 level. This led to a move that touched the channel line. The current move higher is taking place after a touch at the lower end of a short term bear channel and after there was a higher low in the Stochastics (bullish divergence). There is a resistance area from 0.7300 to 0.7314 that coincides with a midline in the channel. In addition the upper Bollinger Bans are not that far above the zone either.

Conclusion:

With price being at a historical pivot high and close to the short term channel bottom it makes sense to wait for better levels to enter into short trades. The zone from 0.7300 to 0.7314 is an area we should be looking for momentum reversal signals as the channel midline and the upper Bollinger Bands coincide with the zone. For UK and Euro Area economic releases, see our economic calendar here: HotForex Economic Calendar

Join me on Live Analysis Webinar on Tuesday 3rd of March at 12:30 pm GMT. Register HERE  for FREE and as usual it is better to log in early to get your seat!

Janne Muta
Chief Market Analyst
HotForex

Disclaimer: Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of purchase or sale of any financial instrument.

Publication source
HotForex information  HotForex reviews

September 30, 2016
The OPEC greases the wheels for oil
The global equities rally led by the gains in the energy sector after the OPEC members cut a deal in Algiers, despite the market scepticism and repeated statements that the Oil officials in Iran and Saudi Arabia are not able to find a middle ground in the current conditions...
September 30, 2016
Opec deal no certainty
In a huge surprise to the market, members of the Opec cartel agreed to cut production by as much as 700,000 barrels a day with some predicting that this may be the start of a new upward trend for oil...
September 30, 2016
Brent futures consolidated their gains
Brent rose in the European session after a surprised OPEC decision to cut oil output. Moreover, a draw in U.S. crude stocks gave an additional support for oil prices...

Tickmill Rating
OANDA Rating
FIBO Group Rating
FBS Rating
Larson&Holz IT Ltd Rating
HYCM Rating

Binary Brokerz Rating
365BinaryOption Rating
TopOption Rating
Grand Option Rating
OptionFair Rating
Anyoption Rating