Many inflation data coming this week, and the fact that Britain is in fact entered into deflation in April (-0.1% year-on-year CPI) moves the differential inflation back in favour of the euro zone. Already shown in the past, we propose this graph that actually shows us with the green vertical lines what happened to EURGBP compared with a transition from a negative Euro-Uk inflation spread to a positive one. The EurGbp rebound in theory should not be far away; we are then in a similar situation to EurUsd.
Anyway, it does not mean that you're forced to anticipate the market also because there are no concrete signals yet. Obviously investors await further confirmations of a different inflationary dynamic from that seen in recent years, but a good yardstick to catch the tendency in advance could be the weekly chart of EURGBP in relation to Rsi. Prices keep on dancing around the 61.8% of retracement of the entire bull market began in 2002 and the weekly RSI continues to rise. After testing the descending trend line the RSI has reversed its course by denying a bullish precursor signal. An upward break would be the first symptom of a probable trend reversal for EURGBP (Chart source: Bloomberg and Metastock).
Anyway, it does not mean that you're forced to anticipate the market also because there are no concrete signals yet. Obviously investors await further confirmations of a different inflationary dynamic from that seen in recent years, but a good yardstick to catch the tendency in advance could be the weekly chart of EURGBP in relation to Rsi. Prices keep on dancing around the 61.8% of retracement of the entire bull market began in 2002 and the weekly RSI continues to rise. After testing the descending trend line the RSI has reversed its course by denying a bullish precursor signal. An upward break would be the first symptom of a probable trend reversal for EURGBP (Chart source: Bloomberg and Metastock).
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