EURGBP Tests Major Support

21 October, 2016

This morning we saw the release of German PPI YoY and MoM figures for September. The former fell to -1.4%, compared to expectations of -1.2%. The latter was -0.2%, in line with expectations. Also we saw the release of UK Retail Sales and Core Retail Sales (YoY and MoM) for September, all lower than expectations.

The underperforming UK retail sales figures helped EURGBP firm.

EURGBP pulled back since 12th October after testing the long term major resistance zone between 0.9060 – 0.9150, as the selling pressure is very heavy at this level. The price held above the support level at 0.9000 between 11th to 17th, yet the level was broken on 18th. The level at 0.9000 has turned into the near term major resistance level.

The current price holds above the downside short term uptrend line support, where another support line at 0.8900 converges, which is providing a stronger support. The price is likely to rebound here.

In addition, the daily Stochastic Oscillator is below 20, suggesting a rebound.

The current trading pattern is likely to oscillate in the range between 0.8900 and 0.9060.

The resistance level is at 0.9000, followed by 0.9060 and 0.9150.
The support line is at 0.8900, followed by 0.8850 and 0.8800.

Keep an eye on the ECB interest rate and deposit rate decisions, to be released at 11:45 GMT today. The market expectations are the rates will likely remain unchanged. Yet we need to pay attention to the ECB president Draghi’s statement, to be released subsequently at 12:30 GMT, as unexpected wording will cause volatility for the Euro.


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