EURGBP, Daily
Sterling has lifted on the surge in UK retail sales in April data released earlier. Cable rallied to a 16-day peak of 1.4663, and EURGBP fell to its lowest level since Feb-4, of 0.7649, with subsequent bounces so far being curtailed by fresh selling. Retail sales surged 4.3% y/y versus the median forecast for a 2.5% rise, with the m/m comparison lifting by 1.3%. March data were revised higher too, to -0.5% m/m from -1.3%, and to +3.0% y/y from +2.7%. The data tallies with yesterday’s labour market report showing a new record high level of employment and a hotter than expected +2.0% y/y rise in average household income (ex-bonuses). The data also mitigates concerns that Brexit uncertainties might have been affecting consumer-sector activity.
All very interesting and we could have reached a Tipping Point in the referendum debate too. I am bullish sterling from here anticipating that Brits will vote to remain in the EU at the Jun-23 referendum. This will start to be priced into GBP over the coming weeks, (there are five weeks left until polling day). GBPUSD broke through 146.00 yesterday and a break over 147.00 would be needed for more GBP strength, however, with a June / July FED hike now looking probable instead of possible the better trade looks like the EURGBP.
The EURGBP looks to have a downside Target 1 0.7530 – 0.7500 and the 200 DMA, further down 0.7420 is a Weekly support and 61.8 FIB, and finally 0.7330 is the 2016 low.
The big move in the pair yesterday was three times the normal daily range. It broke through the March and February lows around 0.7720-0.7700 and closed exactly on the 38.2 Fibonacci level and outside the lower Bollinger band. Following such a large move my entry would be triggered on a retracement to the 0.7720 – 0.7770 area.
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Janne Muta
Chief Market Analyst
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Janne Muta is a seasoned industry professional with over 16 years experience in the global markets. Originally from Finland, Janne has worked for institutions in both Helsinki and London as an institutional fund manager, global market analyst and FX educator.
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