technical analysis EURGBP

Technical analysis of EURGBP

The euro has been fairly inactive but held strength against the pound so far this month around the important psychological area of 90p. Yesterday’s slightly positive Ifo Business Climate gave the euro a very brief boost. However, there’s been no sign of a clear breakout as traders await speeches by Andrew Bailey and Christine Lagarde at the virtual Jackson Hole summit of central bankers tomorrow. This technical analysis of EURGBP looks at the daily chart (D1).

High resistance here is pretty clear as around 91.4p; this area was tested twice without success in late June and late last month. Low support is April’s low around 87p, but this fairly distant area probably won’t be tested again in the near future, with moving averages and Fibonacci likely to be more important.

Technical indicators on EURGBP D1

 

Moving averages continue to give a buy signal, with each of the 50, 100 and 200 SMAs above slower ones. However, the price has now moved below the 50 SMA from Bands and is testing the 100. A clear movement back above the 50 SMA might presage an upward breakout from August’s range so far, but it might be another few days before such an event, in other words after the current holiday month has ended. To the downside, the 200 SMA could probably limit a retracement on this timeframe.

Price is approaching the lower deviation of Bollinger Bands (50, 0, 2) but has yet to signal oversold by actually moving past it. Similarly the slow stochastic (15, 5, 5) at about 47 is very close to neutral. The contraction of Bands recently would traditionally be considered as signalling an upcoming breakout. Volume meanwhile has been skewed very slightly towards buying so far this month.

Price action and Fibonacci

 

Recent price action has generally been insipid, but the interrupted three crows at the very end of July might signal losses to come. The focus of traders is on how price behaves around the speeches of central bankers tomorrow and on Friday, particularly whether the current test of the 100 SMA ends up being successful. If not, a long tail around that area might suggest some gains into the end of the week.

The 38.2% daily Fibonacci retracement has formed the reference point for August’s movements so far and no real attempt has been made to move much past it in either direction. To the upside, the 23.6% interacts with the latest visually determined resistance around 91.4p, strengthening this area. Looking lower, the 50% retracement was an important resistance and then support in May and June and will coincide with the 200 SMA over the next few periods, so this looks like a strong support from which a bounce might be expected.

Virtual Jackson Hole

 

Senior members of major central banks will be giving remote speeches as part of 2020’s annual conference in Jackson Hole, Wyoming, USA. While most bankers will probably have crafted their comments very carefully, aware that traders and investors will be watching intently, any clues that can be discovered about ongoing QE around the world might help to inform traders over the next few weeks.

‘No news is bad news’ might be the name of the game from the latest round of trade talks between the UK and the EU. After another failure to make much progress, the likelihood of no trade deal appears to be increasing. This is a major risk to the pound: in the absence of some positivity from Michel Barnier, sterling has considerable room to fall this Autumn although a last-minute deal might still be agreed in Q4.

Technical analysis of EURGBP: summary

 

The technical picture for euro-pound is generally mixed, with upcoming direction unclear. In the context of Jackson Hole, this makes some sense. Monitoring comments from central bankers, particularly at the ECB and BoE, is essential. Significant statements might be all that’s needed for EURGBP to commence a new trending movement.

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