EUR/GBP finally moving lower
Often times, trading is not all about the fast moves and volatile price action. Stark headlines and bellowing market commentators may grab the media’s attention, but a trader always needs patience and discipline to execute their orders in accordance with their trading strategy. And nine times out of ten that means waiting and not changing course, trusting in the homework and analysis that the traders has done over time.
Shorting EUR/GBP is a trade that incorporates the valued commodity of patience more than many other currency trades in recent times.
The pair has tracked sideways for several months with a bearish bias and has threatened to break down to the year-to-date low at 0.8471 without quite decisively closing lower. We may finally now be seeing that break to the downside with prices hitting 18-month lows this morning.
Respective central bank policies
Policy divergence has been a key theme for FX traders this year as major central banks across the globe take different routes and so speeds back to policy normalisation. The Bank of England recently avoided cutting its growth forecasts with definitive signs of life returning to normal in the UK.
In stark contrast, the ECB is debating whether to loosen policy some more to get inflation back to its 2% target. The supremely dovish central bank is offering zero support to the embattled single currency. Furthermore, concerns over the Delta variant are growing with this morning’s German investor morale falling further on fears over a fourth Covid-19 wave.
EUR/GBP through key support
The long-term downtrend looks to have asserted its dominance with the 100-day simple moving average acting as resistance just below 0.86.
With the break finally pushing below the long-term pivot at 0.8471, a weak close and so failure at the April low will confirm that more downside is on the cards. Long-term levels are now in play including the December 2016 / April 2017 lows and the December 2019 / February 2020 bottoms in a support zone around 0.8275/0.8304. The market will remain on the defensive while the pair is capped below the mid-July lows at 0.8503.
