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EURGBP looking to break key levels

Market Analysis

EURGBP, Daily              

The EURGBP created a Hammer candle low on Tuesday (September 6) at 0.8332 from the recent high (August 12) at 0.8723. Two strong up days last week, through the 23.6 Fibonacci level and a touch of the 50 DMA and 38.2 Fib level spiked my interest on Friday.  A close above the 0.8360 level on the Daily candle would generate a LONG position from here.  Target 1 would be 0.8540 and Target 2 0.8624.

Sterling weakness may not translate into improved trade. The UK’s stats office last week downplayed the view that a July dip in the trade deficit was down to the weaker pound following the Brexit vote. The trade-weighted Sterling Exchange Rate Index dove 6.6% in July versus the average level in June, and was down by 15.0% versus July 2015 levels. Aside from noting month-to-month volatility in trade numbers, the ONS detailed the complexities in assessing the impact of currency levels on trade, highlighting that both export and import prices rose by over 3% in July, for instance. This fits the pattern seen during the pound’s weakness over 2008-2009 crisis period when the balance of trade in goods and services remained, according to the ONS, “broadly unchanged” both during and following a 25% depreciation in the trade-weighted value of the pound.

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Stuart Cowell

Market Analyst

HotForex

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