EUR/GBP was on a bullish trend from August until the middle of last month, gaining around 250 pips, with moving averages acting as support, providing opportunities to buy this pair when the price retreated lower. But, the trend shifted late last month and sellers have been in control, with MAs acting as resistance at the topside now, where we have been selling this pair.
The downtrend has stalled for now in EUR/GBP
We decided to open a sell forex signal earlier this week after this pair fell around 200 pips, with the pace of the downtrend being really strong. The 50 SMA (yellow) has been the ultimate resistance indicator during the decline, but the price action has stabilized in the last week or so and EUR/GBP has been consolidating below 0.86, so our signal has been live for several sessions.
The Eurozone economy has deteriorated rapidly this year, and the ECB has become more dovish, but a similar picture is emerging in the United Kingdom, with economic data indicating deepening economic weakness and the Bank of England returning to the sidelines as well. We saw some improvement in the PMI services and manufacturing numbers for November, but both economies remain close to recession, so both these currencies have been among the weakest ones in recent weeks.
Yesterday we had a round of economic data from the Eurozone which leaned more on the negative side, so we were hoping that the Euro would resume the decline and this pair would resume the downtrend. Germany’s industrial production was reported to have decreased by 0.4% in October, rather than increasing by 0.2% as expected. Economists predict that weakening foreign demand, and deteriorating economic conditions will put more pressure on German output in the fourth quarter.
The Q3 GDP remained unchanged at -0.1% in the final revision, while employment was revised lower to 0.2% for the same quarter. Today there is no major data from these two economies scheduled, so comments from ECB and BOE members will be movers for the Euro and the GBP.
EUR/GBP Live Chart
EUR/GBP