Key Highlights
- EUR/GBP declined heavily below the 0.8880 and 0.8800 support levels.
- The next key support is near the 0.8640 and 0.8620 levels.
- The Euro Zone CPI could rise 0.9% in Sep 2019 (YoY), similar to the last reading.
- UK’s CPI might increase 1.8% in Sep 2019 (YoY), more than the last +1.7%.
EUR/GBP Technical Analysis
This past week, there was a sharp rise in GBP/USD, resulting in a nasty decline in EUR/GBP. It seems like the British Pound might continue to gain strength against the Euro below the 0.8800 pivot area.
Looking at the 4-hours chart, the pair started a sharp decline from the 0.9019 high. There was a break below a major triangle support near the 0.8895 level, opening the doors for a downtrend.
The pair declined heavily below the 0.8880 support and the 100 simple moving average (red, 4-hours). Moreover, there was a close below the 0.8800 pivot and the 200 simple moving average (green, 4-hours).
The decline was such that the pair even traded below the 1.236 Fib extension level of the upward move from the 0.8786 low to 0.9019 high. It seems like the pair could continue to slide further below 0.8700.
The first major support is near 0.8640, which coincides with the 1.618 Fib extension level of the upward move from the 0.8786 low to 0.9019 high. Any further losses might push the pair towards the 0.8620 support area.
Conversely, if there is an upside correction, the pair could face resistance near the 0.8700 and 0.8750 levels. The main resistance is now close to the 0.8800 area (the previous support).
Fundamentally, the Euro Zone Economic Sentiment for Oct 2019 was released by the ZEW. The market was looking for a decrease in the sentiment index from -22.4 to -33.0.
However, the actual result was better, as the sentiment index only declined to -23.5. Besides, the German ZEW sentiment index also declined from -22.5 to -22.8, less than the forecast of -27.0.
The report added:
In the current October survey, the assessment of the economic situation in Germany worsened again, by 5.4 points, with the corresponding indicator falling to a current reading of minus 25.3 points. This has been the lowest reading since April 2010.
Overall, EUR/GBP might continue to face selling interest in the near term. EUR/USD also struggled after the release and it remains at a risk of a fresh decline below 1.1000. On the other hand, GBP/USD is showing positive signs and remained well bid above the 1.2550 level.
Upcoming Economic Releases
- UK Consumer Price Index Sep 2019 (YoY) – Forecast +1.8%, versus +1.7% previous.
- UK Core Consumer Price Index Sep 2019 (YoY) – Forecast +1.7%, versus +1.5% previous.
- Euro Zone CPI for Sep 2019 (YoY) – Forecast +0.9%, versus +0.9% previous.
- Euro Zone CPI for Sep 2019 (MoM) – Forecast +0.2%, versus +0.1% previous.
- US Retail Sales Sep 2019 (MoM) – Forecast +0.3%, versus +0.4% previous.
- Canadian Consumer Price Index Sep 2019 (MoM) – Forecast -0.2%, versus -0.1% previous.
- Canadian Consumer Price Index Sep 2019 (YoY) – Forecast +2.1%, versus +1.9% previous.
