Currency pair of the week: EUR / GBP
The next currency direction of the EUR / GBP pair may depend on who can best handle the next wave of coronavirus.
The European Central Bank (ECB) was a little less accommodating when it met last week. Central bank members agreed to slow down the pace of bond purchases under the Pandemic Emergency Purchase Program (PEPP), while letting it expire as planned in March 2022. From there it will continue to buy bonds under the current asset purchase program. (APP). at a rate of 40,000 million euros in the second quarter and 30,000 million euros in the third quarter. The ECB will continue to buy bonds at an interest rate of € 20 billion until it is deemed sufficient. However, given that members have stopped buying variable capital bonds (in terms of time), there is still a chance that the ECB will raise rates by the end of 2022. Also, the next wave of coronavirus sweeping the world could take a few years. hour. toll in Europe. European countries are meeting this week to determine how fast the Omicron variant is spreading in Europe and what restrictions need to be taken to prevent hospitals from being invaded, as happened almost 2 years ago. This could generate volatility for the euro.
The Bank of England also met last week and surprised the markets with a rise of 15 basis points! Recall that in the previous meeting, the BOE surprised the markets by NOT increasing rates. After it became clear that the Omicron variant was going to be a force to be reckoned with in the UK, markets were expecting an unchanged BOE call for December. But instead it has risen due to rising inflation in the UK, which the central bank expects to exceed 6% in April. Speaking of outbreaks, the new number of coronavirus cases is on the rise in the UK, with Omicron crawling into Delta, seeking to take first place for the most dominant spot. As a result, Prime Minister Boris Johnson activated ‘Plan B’, which includes working from home, wearing masks in public places and covid passports. There may be additional covid restrictions before Christmas. To top it all, the main Brexit negotiator, David Frost, has just resigned! He was unhappy with the Covid passports and wrote that the UK “should learn to live with COVID.” More to come on Prime Minister Johnson’s greedy decisions. What does this mean for the British pound forex?
On the daily chart, the EUR / GBP has been trading in a descending channel since mid-April (blue channel) from a pf higher than 0.8719 to 0.8381. However, since September 29, the channel’s range has widened, creating a larger channel (green channel). Horizontal support is just below the 50-day moving average at 0.8480. Previous resistance is at the 200-day moving average at 0.8553.
EUR / GBP daily chart
Source: Tradingview, Stone X
On the 4-hour chart, the EUR / GBP appears to have crossed the neckline of a head and shoulders pattern and remains close to the 50% Fibonacci retracement level from the November 22 highs to the December 8 lows. , near 0, 8490. The goal of a Head and Shoulders pattern is the distance between the head and neckline added to the point where the neckline is broken. In this case, the target is close to 0.8400. However, the couple EUR / GBP It should first go through the 50-day moving average and the 61.8% Fib retracement level from the aforementioned period near 0.8464. Shown below is the peak of the December 16 low near 0.8453 and horizontal support at 0.8427. Resistance is at the neckline at the Head and Shoulders figure near 0.8505, previous highs at 0.8528 and the 200-day moving average.
EUR / GBP chart 4 hours
Source: Tradingview, Stone X
It looks like the Bank of England will raise rates faster than the European Central Bank. However, the next direction for the EUR / GBP pair in the currency market may depend on who can best contain the next wave of coronavirus. Be on the lookout for volatility, especially with lighter volume and shorter week!
By Joe Perry, Forex.com » Official site
Disclaimer: The information and opinions contained in this report are provided for general information only and do not constitute an offer or solicitation to buy or sell currency or CFD contracts. Although the information contained in this document has been taken from sources considered reliable, the author does not guarantee its accuracy or completeness, and does not assume responsibility for any direct, indirect or consequential damages that may result from the fact that someone trusts such information.
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