Euro bearishness prevails

EURGBP, H4

Out of UK today, we have seen UK house price inflation held at a five-year low, according to the March RICS measure. The headline was 0, the same as the month prior and below the Reuters median forecast for a rise to a +2 reading. The report also found that expectations over the next three months were flat, though more positive of the 12-month horizon.

However the significant driven of the Pound was so far today, the BoE credit conditions survey which suggested that consumer credit boom coming to an end. The availability of unsecured credit to households decreased “significantly”, according to the report, with lenders tightening criteria for both credit card and other unsecured loans. Default rates increased and the BoE report suggested that tougher lending criteria were partly due to changing risk appetite among lenders. This comes after the FCA warned this week that even a gradual increase in rates could have a “detrimental impact” on consumers carrying a lot of debt. Overall the BOE reported noted that “there have been tentative signs of weakening demand for consumer credit, although it remains robust”.

Based on above the Pound finds a bid the last 2 hours, with EURGBP drifting sharply lower by nearly 30 pips. The cross has broken sharply lower since March 3. The weaker than expected Eurozone production data that fell for a third consecutive month, also weighed on Euro against pound. The EURGBP has drifted nearly 0.3% from open price today, and by 3% from March peak.

The pair is currently traded below the round 0.8700 level which consider be a strong support level since September 2017. The next support level comes at the latest Daily swing low at 0.8655. Hence in long-term, we still face a consolidation mode, within 0.8700-0.8780 area, during April. However the pair is in a strong downtrend the last 7 weeks, with negative technical picture confirming more of the same for the near future. Nevertheless, the 50-DAY EMA which slopes below 20-DAY MA and the sharply negative MACD, confirm further weakness.

In short-term time-frame, the 3 consecutive full body bearish candles in the hourly chart, along with the break of the lower Bollinger Bands pattern, suggest that there is further steam to the downside and hence a possible retest of the March 22 low, at 0.8766. This level also complies with ATR value which is at 36 points. The hourly MACD turned to negative while RSI slopes lower, but still holds above the oversold barrier at 31.

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