EUR/GBP traded lower during the European morning Tuesday

EUR/GBP

• The dollar is trading higher against almost all of its G10 peers during the European morning Tuesday, ranging from +0.14% vs GBP to +0.85% vs NOK. It was slightly lower only against JPY.

• The euro traded lower even after Eurozone’s preliminary estimate of CPI came in at -0.1% yoy in March vs -0.3% yoy in February, in line with expectations. The bloc’s unemployment rate declined to 11.3% in February from an upwardly revised 11.4% in January. Even the fall in the German unemployment rate to a record low was not enough to reverse the negative sentiment towards EUR. EUR/USD fell below the 1.0800 level and is currently heading to test our next support at 1.0700. A break of that level could see scope for another leg down, perhaps towards 1.0610.

• The final estimate of UK GDP for Q4 showed a rise of +0.6% qoq and +3.0% yoy, above expectations of an unchanged reading from the 2nd estimate (+0.5% qoq). GBP/USD jumped on the news but gave back all the gains immediately as the bears found a renewed GBP shorting opportunity. Despite the strong figures, the building uncertainty ahead of the UK general election in May is likely to weigh on the sterling and push GBP/USD even lower. However, the better fundamentals may keep GBP supported against EUR.

• EUR/GBP traded lower during the European morning Tuesday, after finding resistance at 0.7340 (R1). After the break below the short-term uptrend line taken from the low of the 11th of March, the rate started trading within a possible downside channel. For that reason, I would consider the short-term bias to have switched to negative. A clear move below the support line of 0.7230 (S1) is likely to set the stage for more bearish extensions and could target the next support at 0.7160 (S2). Our short-term oscillators reveal negative momentum and support the continuation of the new-born short-term downtrend. The RSI slid after hitting resistance near its 50 line and is now headed towards its 30 line, while the MACD, already below its trigger, dipped into its negative territory. On the daily chart, the broader trend is negative as well. After the downside exit of the triangle pattern on the 18th of December, the price structure has been lower peaks and lower troughs below both the 50- and the 200-day moving averages. The recent decline came after EUR/GBP hit resistance at the 50-day moving average and supports my stance to treat the recovery started on the 11th of March as a corrective move of the larger negative path.

• Support: 0.7230 (S1), 0.7160 (S2), 0.7100 (S3).

• Resistance: 0.7340 (R1), 0.7385 (R2), 0.7455 (R3).