Don't Change Your Holiday Money Pounds to EUR Just Yet
by
Matthew Clark
Within only four weeks the EUR/GBP fell 400 pips. Read in our daily guest blog post what the reasons behind these significant movements were.
The GBP hunted down the 0.70 psychological level against the euro yesterday falling just shy by 14 pips. With quantitative easing having started on Monday thanks to the ECB, the markets are focused on the monetary policy divergence between Britain and on the euro hitting new multi-year lows against the US Dollar as well. In just a month the EUR/GBP has fallen more than 400 pips which for this pair is a significant move over 5 percent.
With the ECB out of the way, all eyes were focused on Bank of England Governor Carny to determine the direction of the sterling. He reiterated that while inflation is low and could continue close to zero for some months that output growth remains solid and that a gentle rise in the bank rate later in the year is consistent
Yesterday we had weaker than expected UK data with manufacturing production falling by 0.5 percent and industrial production also printing a 0.1 percent on the month of January. We were expecting the GBP/USD to print a new low yesterday having failed to break on Tuesday, and it duly obliged testing as low as 0.7014.
This is mostly due to dollar strength, though, rather than GBP weakness as the EUR/GBP hit new lows on the fact that the UK will raise its rate before Europe. We saw late in the European session some short covering but this looks like a brief respite for the EUR/GBP with lower targets around the 0.6550 level possible roughly around 2004 and 2007 lows.
Bearing in mind the upcoming election in the UK in May we would expect uncertainty to start weighing on the pound soon but, in the meantime, it looks like there is still some distance to go before a more significant low in the EUR/GBP and a multi-week/month rally occurs. With more than two million UK citizens living in Europe is it time to change your holiday money?
Looking at the long term weekly EUR/GBP chart we can see that an imminent completion of five-waves down from the highs in 2013 is close at hand and should lead to a stronger recovery in the coming weeks. With the RSI showing that the EUR/GBP has been oversold since the beginning of the year we should be aware that a low may soon be in place, especially with upcoming weakness from the general-election uncertainty bound to weigh on the pound.
Looking at the short term chart, however, it would appear that this low is not yet in place. We can see that yesterday’s short covering simply completed a wave 4 (or soon will) for another new low as we complete wave 5 of 3. Look for any bounces in the EUR/GBP to sell into as we continue lower in the coming days before finally completing 5-waves lower and seeing a more considerable retracement--as the weaker euro eventually results in stronger regional economies such as Spain and Italy. So although it’s not time to change your holiday money yet it’s not far away against this euro.
The GBP hunted down the 0.70 psychological level against the euro yesterday falling just shy by 14 pips. With quantitative easing having started on Monday thanks to the ECB, the markets are focused on the monetary policy divergence between Britain and on the euro hitting new multi-year lows against the US Dollar as well. In just a month the EUR/GBP has fallen more than 400 pips which for this pair is a significant move over 5 percent.
With the ECB out of the way, all eyes were focused on Bank of England Governor Carny to determine the direction of the sterling. He reiterated that while inflation is low and could continue close to zero for some months that output growth remains solid and that a gentle rise in the bank rate later in the year is consistent
Yesterday we had weaker than expected UK data with manufacturing production falling by 0.5 percent and industrial production also printing a 0.1 percent on the month of January. We were expecting the GBP/USD to print a new low yesterday having failed to break on Tuesday, and it duly obliged testing as low as 0.7014.
This is mostly due to dollar strength, though, rather than GBP weakness as the EUR/GBP hit new lows on the fact that the UK will raise its rate before Europe. We saw late in the European session some short covering but this looks like a brief respite for the EUR/GBP with lower targets around the 0.6550 level possible roughly around 2004 and 2007 lows.
Bearing in mind the upcoming election in the UK in May we would expect uncertainty to start weighing on the pound soon but, in the meantime, it looks like there is still some distance to go before a more significant low in the EUR/GBP and a multi-week/month rally occurs. With more than two million UK citizens living in Europe is it time to change your holiday money?
Looking at the long term weekly EUR/GBP chart we can see that an imminent completion of five-waves down from the highs in 2013 is close at hand and should lead to a stronger recovery in the coming weeks. With the RSI showing that the EUR/GBP has been oversold since the beginning of the year we should be aware that a low may soon be in place, especially with upcoming weakness from the general-election uncertainty bound to weigh on the pound.
Looking at the short term chart, however, it would appear that this low is not yet in place. We can see that yesterday’s short covering simply completed a wave 4 (or soon will) for another new low as we complete wave 5 of 3. Look for any bounces in the EUR/GBP to sell into as we continue lower in the coming days before finally completing 5-waves lower and seeing a more considerable retracement--as the weaker euro eventually results in stronger regional economies such as Spain and Italy. So although it’s not time to change your holiday money yet it’s not far away against this euro.
This article is written by Matthew Clark who is the owner of
Global Forex Pros.
ABOUT THE AUTHOR: Matthew has been a trader for more than 20 years running FX desks at major banks and retail brokers. He recently started Global Forex Pros as a service for brokers to offer their clients, teaching them to trade in real time as professional traders learn at banks and institutions, giving the retail trader the confidence to trade and increasing volumes for the broker. Matthew has been a trader for more than 20 years running FX desks at major banks and retail brokers. He recently started Global Forex Pros as a service for brokers to offer their clients, teaching them to trade in real-time as professional traders learn at banks and institutions, giving the retail trader the confidence to trade and increasing volumes for the broker.
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Network, Learn, Grow | FMAS:24
Network, Learn, Grow | FMAS:24
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Get ready to mark your calendars for FMAS:24, returning this May! Take a quick glimpse of what awaits at the Sandton Convention Centre in Sandton, South Africa from May 20-22, 2024.
Don't miss out on this 5-second invite packed with energy and urgency!
Secure your free ticket now 🔗 https://events.financemagnates.com/yQx0l?utm_source=youtube&utm_campaign=fmas-is-back&utm_medium=video&RefId=FMAS24+Video+Ad+%5B1%5D
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Here's a sneak peek into the FMAS:24 vibrant atmosphere! Join us at Africa’s premium financial event for a transformative experience that combines the best of finance and technology.
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#fmas24 #fmas #fmevents #financeinafrica #traders #investors #affiliates #forexTraders #investmentOpportunities #B2BNetworking #finTech #Innovations #TradingCommunity #BusinessOpportunities #AfricanBusiness #Johannesburg #southafrica
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Here's a sneak peek into the FMAS:24 vibrant atmosphere! Join us at Africa’s premium financial event for a transformative experience that combines the best of finance and technology.
From May 20-22, 2024, the Sandton Convention Centre in Sandton, South Africa, will be the hub for over 3,500 attendees to engage in unparalleled networking opportunities, learn from over 150 industry-leading speakers, and explore innovations from 120+ exhibitors.
Secure your free ticket now 🔗 https://events.financemagnates.com/yQx0l?utm_source=youtube&utm_campaign=fmas-is-back&utm_medium=video&RefId=FMAS24+Video+Ad+%5B1%5D
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Join 3500+ Attendees at FMAS:24 | Africa's Premium Financial Event
Join 3500+ Attendees at FMAS:24 | Africa's Premium Financial Event
Looking to expand your network in #Africa? Join 3500+ attendees at FMAS:24, where online trading, fintech, payments, and crypto meet! Connect with industry leaders and innovators for an unmatched networking experience.
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Join 3500+ Attendees at FMAS:24 - Africa's Premium Financial Event
Join 3500+ Attendees at FMAS:24 - Africa's Premium Financial Event
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Where the Prop Trading Industry Goes from Here | Finance Magnates Podcast
Where the Prop Trading Industry Goes from Here | Finance Magnates Podcast
Explore the tumultuous world of prop trading in this Finance Magnates podcast episode, featuring insights from Head of Axi Select, Greg Rubin.
We're discussing the challenges and shifts caused by MetaQuotes' pivotal decisions affecting MT4 and MT5 users, and how Axi Select offers a unique, realistic path to professional trading, steering clear of traditional prop firm pitfalls.
Tune in for expert analysis on the future of trading and innovative funding models.
The Axi Select programme is only available to clients of AxiTrader Limited. CFDs carry a high risk of investment loss. In our dealings with you, we will act as a principal counterparty to all of your positions. This content is not available for AU, NZ, EU and UK residents. For more information, refer to our Terms of Service. Standard trading fees apply.
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Explore the tumultuous world of prop trading in this Finance Magnates podcast episode, featuring insights from Head of Axi Select, Greg Rubin.
We're discussing the challenges and shifts caused by MetaQuotes' pivotal decisions affecting MT4 and MT5 users, and how Axi Select offers a unique, realistic path to professional trading, steering clear of traditional prop firm pitfalls.
Tune in for expert analysis on the future of trading and innovative funding models.
The Axi Select programme is only available to clients of AxiTrader Limited. CFDs carry a high risk of investment loss. In our dealings with you, we will act as a principal counterparty to all of your positions. This content is not available for AU, NZ, EU and UK residents. For more information, refer to our Terms of Service. Standard trading fees apply.
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