“Can we go back, this is the moment
Tonight is the night, we’ll fight 'til it’s over
So we put our hands up like the ceiling can’t hold us
Like the ceiling can’t hold us”
- Macklemore, “Can’t Hold Us”
We’ve looked at pound sterling from a couple of different directions so far this week (see here and here for more), but EUR/GBP may offer the most interesting setup, especially with the European Central Bank meeting concluding tomorrow.
In all likelihood, the venerable institution will not make any changes to its monetary policy, leaving its quantitative easing (QE) program and interest rates unchanged at 0.05% (refinancing rate) and -0.20% (deposit rate). That said, ECB President Mario Draghi could still offer hints that could help handicap what the bank is likely to do in the future. Most prominently, traders will closely scrutinize any comments about the ongoing slowdown in China’s economy. Beyond China, any concern about the recent uptick/stabilization in the value of the euro could help nudge traders back into short euro trades. Finally, the ECB will also release its latest staff projections on economic growth, inflation, and unemployment, which can provide a longer-term “baseline” view of future conditions.
Technical View: EUR/GBP
Turning our attention to the chart, we can see that EUR/GBP is testing a critical resistance barrier at .7390. The unit has been rejected from this ceiling on at least five occasions over the last six months, and so far today, bears have been able to defend that key line in the sand.
Beyond previous resistance, the 200-day MA also comes in around that level at roughly .7350 and the RSI indicator is forming a small bearish divergence with last week’s high, so there are certainly a number of signs that the pair could top out here, especially if the ECB comes off as dovish.
On the other hand, if the Draghi and company do not sound particularly concerned with the recent market turmoil, a breakout above that resistance level and a continuation toward .7500 or .7600 could certainly be in play. One way or another, bulls are likely to find out if the “ceiling can’t hold [them]” in the next 48 hours.
Source: FOREX.com
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended Content
Editors’ Picks
EUR/USD clings to daily gains above 1.0650
EUR/USD gained traction and turned positive on the day above 1.0650. The improvement seen in risk mood following the earlier flight to safety weighs on the US Dollar ahead of the weekend and helps the pair push higher.
GBP/USD recovers toward 1.2450 after UK Retail Sales data
GBP/USD reversed its direction and advanced to the 1.2450 area after touching a fresh multi-month low below 1.2400 in the Asian session. The positive shift seen in risk mood on easing fears over a deepening Iran-Israel conflict supports the pair.
Gold holds steady at around $2,380 following earlier spike
Gold stabilized near $2,380 after spiking above $2,400 with the immediate reaction to reports of Israel striking Iran. Meanwhile, the pullback seen in the US Treasury bond yields helps XAU/USD hold its ground.
Bitcoin Weekly Forecast: BTC post-halving rally could be partially priced in Premium
Bitcoin price shows no signs of directional bias while it holds above $60,000. The fourth BTC halving is partially priced in, according to Deutsche Bank’s research.
Week ahead – US GDP and BoJ decision on top of next week’s agenda
US GDP, core PCE and PMIs the next tests for the Dollar. Investors await BoJ for guidance about next rate hike. EU and UK PMIs, as well as Australian CPIs also on tap.