EUR GBP - FUNDAMENTAL DRIVERSEUR
FUNDAMENTAL BIAS: NEUTRAL
1. Monetary Policy
Hawkish! This sums up the Feb ECB policy meeting. The initial statement was in line with Dec guidance and offered very little surprises (which was initially seen as dovish). However, during the press conference President Lagarde explained that the upside surprises in CPI in Dec and Jan saw unanimous concern around the GC in the near-term and surprised markets by not repeating Dec language which said a 2022 rate hike was unlikely (which immediately saw STIR markets price in a 10bsp hike as soon as June). The president also made the March meeting live, by stating that they’ll use the March meeting to decide what the APP will look like for the rest of 2022 (which markets took as a signal that the APP could conclude somewhere in 2H22. After the meeting we had the customary sources comments which stated that the ECB is preparing for a potential policy recalibration in March (with some members wanting to change policy at today’s meeting already) and added that it is sensible not to exclude a 2022 hike as a possibility and also stated that the ECB is considering possibly ending the APP at the end of Q3 (which would put a Q4 hike in play). Furthermore, sources stated that if inflation does not ease, they’ll consider adjusting policy in March (which means incoming inflation data will be critical). The shift is stance and tone were significant for us to change the bank’s overall policy stance to neutral and to adjust the EUR’s fundamental bias from dovish to neutral as well. Incoming inflation data will be key from here.
2. Economic & Health Developments
Even though the recent activity data suggests the hit to the economy from previous lockdowns weren’t as bad as feared, the additional lockdown measures across Europe has weighed on incoming data. Growth differentials still favour places like the US and UK above that of the EZ and alongside the clear monetary policy divergence means the bearish bias is firmly in place. On the fiscal front, attention is on ongoing discussions to potentially allow purchases of ‘green bonds’ NOT to count against budget deficits. If approved, this could drastically change the fiscal landscape for the EZ and would be seen as a big positive for the EUR and EU equities.
3. Funding Characteristics
As a low yielder (like JPY & CHF), the EUR has been a funding choice among carry trades, especially during 2019 where it was a favourite against high yielding EM. As such, part of the EUR’s upside after the initial risk-off scare in March 2020 was attributed to a major unwind of large carry trades. As more central banks start normalizing policy and rate differentials widen, the EUR’s use as a funding currency could add additional pressure in the med-term , but keep in mind it could also spark risk off upside if some of those trades unwind.
4. CFTC Analysis
Remember that the ECB meeting this past week took place on Thursday, that means that the most recent CFTC update will not include the big jolt higher in the EUR across the board. We would expect next week’s data to show a sizeable increase in large spec net-longs as well as a very big reduction in leveraged fund net-shorts. With so many negatives priced in for the EUR in recent weeks, the unwind could be punchy.
5. The Week Ahead
In the week ahead we have a very light economic calendar coming up for the Eurozone, but we do have quite a few ECB speakers lined up and that will take centre stage for markets. Looking at the moves in both bund yields and the EUR, the ECB members will no doubt have quite a few questions they’ll need to answer and will want to give their own views and opinions. If the ECB thinks the markets overreacted to the message conveyed by President Lagarde, they will want to use this week to get on the wires as much as possible to correct any misplaced expectations. That means President Lagarde’s testimony before the EU Parliament Economic and Monetary Affairs Committee will be scrutinized for any additional details and info, especially with markets now pricing in over 50 basis points of tightening by year-end as well as a Q2 end to QE . Without any strong push back from the ECB in the week ahead will likely lead to a further unwind in short-positioning and should continue to be supportive for the EUR in the very short-term.
GBP
FUNDAMENTAL BIAS: WEAK BULLISH
1. Monetary Policy
Hawkish surprise with a hint of dovish undertones sums up the Feb BoE decision. The bank announced the start of passive QT and also hiked rates by 25bsp as expected, but the vote split was unanimous (9-0) but with a big hawkish surprise being 4 MPC members voting for a 50bsp hike. Inflation forecasts saw a big upward revision to a 7.25% peak by April ( prev . 6.0%) & 5.21% in 1-year ( prev . 3.40%). This initial hawkish statement saw immediate strength for GBP but during the press conference the BoE tried their best to get a dovish landing. Gov Bailey started his opening remarks by noting that the MPC’s decision to hike was not because the economy was strong but only because higher rates were necessary to return inflation to target, and even though he opened the door for further hikes he added that markets should not assume rates are on a long march higher. He also acknowledged the stagflation fears recently voiced by some market participants by saying that policy faces a trade off between weakening growth and higher inflation . Despite the dovish nuances, STIR markets still price an implied cash rate of 1.0% by May which would mean a 25bsp in both March and May (1.0% is the level the BoE previously said they would being outright Gilt selling). Overall, the statement was hawkish, but
the clear dovish undertones from the BoE was a bit surprising and also a bit worrisome for the future outlook.
2. Economic & Health Developments
There is a growing chorus of participants calling for a very tough road ahead for UK growth, and most recent Retail Sales data gave more confirmation to this expectation. Forecasts by the IMF/OECB still sees decent growth differentials, but not everyone shares that optimism (Refinitiv polling data). Even though the solid econ data going into Dec was enough to see the BoE hike, the overall rate expectations already priced in by markets are too ambitious. As long incoming data stay solid it should keep odds for additional tightening alive, but we should be mindful of repricing if the incoming data starts confirming a bleaker picture for growth.
3. Political Developments
The political uncertainty surrounding PM Johnson mean a higher risk premium for GBP. The fallout from the heavily redacted Sue Gray report was limited but reports over the weekend show a growing distrust for the PM from within his own party. The question remains whether enough MPs opt for a vote of no-confidence (if so, that could see short-term downside), but after that the focus will be on whether the PM can survive an actual vote of no-confidence, where a win is expected to be GBP positive and negative for Sterling if he loses. The North Ireland protocol is still in focus in the background with the UK threatening to trigger Article 16 and the EU threatening to terminate the Brexit deal if they do. For now, markets have rightly ignored this as political posturing, but of course any actual escalation could see sharp risk premium built into the GBP
4. CFTC Analysis
The CFTC data for GBP was very surprising. Recall that the downside in the GBP only started later during last week, which means that the very big increase in net-short positioning occurred while Sterling was still flying high. The question here is whether this was some political risk premiums building up or part of a bigger change in sentiment as concerns over the UK’s growth outlook continues to surface.
5. The Week Ahead
Just like the EUR, the biggest focus for the week ahead for Sterling will be on BoE talk. The bank tried really hard to get a dovish landing on Thursday, and any additional info and clarity from them will be keenly watched by market participants. With STIR markets pricing in an implied rate of 1.0% by May, one would have thought more upside is warranted for Sterling, but after the dovish undertones as well as the ongoing political challenges things are looking a bit messy for the GBP right now. If we see a similar divergence between ECB and BoE language like we saw at the press conferences that should put further upside pressure on EURGBP.
Eur-gbp
Will Euro Reverse Against the British Pound Post ECB and BoE?Following a surprise hawkish pivot by the European Central Bank as the Bank of England raised rates to 0.50% from 0.25%, EUR/GBP rallied the most since April 2021 this week. With markets already pricing in an aggressive BoE, that may leave room for equivalent ECB bets to catch up ahead. That could leave EUR/GBP tilted higher.
The pair also closed at the highest since late December, reinforcing the key 0.8277 - 0.8364 support zone that has been in play since 2016.
Even though EUR/GBP has been aiming lower since 2020, a closer look reveals that the pair has been consolidating for over 5 years. This has created a large rectangle where the ceiling lays around 0.9270 - 0.9499.
The latest bounce off the floor of the rectangle may open the door to extending gains given confirmation. That would prolong the pair's long-term range-bound trend.
Immediate resistance appears to be the 78.6% Fibonacci retracement at 0.8538 before a potential falling trendline from 2020 may come into play.
On the flip side, a close under the rectangle floor, with confirmation, may hint at ending consolidating, leaving the pair at risk of extending losses.
FX_IDC:EURGBP
Key level broken and buying opportunity with EURGBPH4 time frame.
Structure: The downtrend ended when the price broke the Key level at 0.83700.
Wait for the price to retest to confirm the uptrend, then you can find buying opportunities.
Profit target is 0.85000 price zone.
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Wish you all have a good trading day!
EURGBP All conditions filled for a riseEURGBP has been trading within a Channel Down since April 2021. Last Thursday, the price touched the bottom (Lower Lows trend-line) of that Channel and Friday posted a strong green 1D candle. This also formed a Bullish Cross on the 1D MACD. Every time the price reverses near the Lower Lows trend-line of the pattern and the 1D MACD makes a bullish cross, it is a signal for a rebound towards the top (Lower Highs trend-line) of the pattern. The previous topeed within the 0.618 - 0.786 Fibonacci zone. We are setting a 0.85000 target on this bullish leg within a 1 month horizon.
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EURGBP can move higher 🦐EURGBP on the daily chart is moving since April 21 in a descending channel at the bottom of a long downtrend.
A few attempts to break above the upper trendline have always failed and the same we can say for the lower one.
Recently the price reached an important monthly support and start to consolidate exactly over the lower trendline.
In this case, a pullback to the upside can be expected and IF the market will break above the resistance at the 0.83800 level we can set a nice long order according to the Plancton Academy rules.
–––––
Follow the Shrimp 🦐
Keep in mind.
🟣 Purple structure -> Monthly structure.
🔴 Red structure -> Weekly structure.
🔵 Blue structure -> Daily structure.
🟡 Yellow structure -> 4h structure.
⚫️ Black structure -> <4h structure.
Here is the Plancton0618 technical analysis , please comment below if you have any question.
The ENTRY in the market will be taken only if the condition of the Plancton0618 strategy will trigger.
EURGBP Could be time for some buy back up?
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Hello there!
If you are keen to learn more on the technical setups,do visit my website at www.shadowingthebb.com !
If you like my analysis and it helped you ,do give me a thumbs ups on tradingview! 🙏
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Thank you!
Disclaimers:
The analysis shared through this channel are purely for educational and entertainment purposes only. They are by no means professional advice for individual/s to enter trades for investment or trading purposes.
The author/producer of these content shall not and will not be responsible for any form of financial/physical/assets losses incurred from trades executed from the derived conclusion of the individual from these content shared.
Thank you, and please do your due diligence before any putting on any trades!
EURGBP Supply And Demand Analysis-Price inside weekly/monthly demand so longs are valid.
-Price is currently reacting off of 4hr supply so short-term sells are valid with smaller risk.
-If price removes the current 4hr supply then we will have a nice 4hr DBR (drop base rally) demand pattern to buy a pullback
for a swing trade.
EURGBP meets strong Demand ZoneIn my last 2 ideas on EURGBP here and here I was short, and we went on to see a nice prolonged drop down to almost a 2 year low.
Now that price has touched the lower trendline and 12H RSI has dropped below 30, I believe a short term reversal could be imminent.
Price has also entered a strong Demand Zone that has seen 5 significant bounces from this area in previous years.
To maximize Risk/Reward I'm looking for a small drop further to 0.83175 for an entry point long, setting a stop loss at 0.82471 (which would represent the lowest price since June 2016), and setting a take profit at 0.84834. This represents a 2.35 R trade, which would require a 29.85% success rate to break even.
Note that this is a HIGH RISK trade at 2.35 R and this is NOT financial, trading or investment advice.
Waiting is part of the game***************************************************************************************
Hello there!
If you are keen to learn more on the technical setups,do visit my website at www.shadowingthebb.com !
If you like my analysis and it helped you ,do give me a thumbs ups on tradingview! 🙏
And if you would like to show further support for me, you can gift me some coins on tradingview! 😁
Thank you!
Disclaimers:
The analysis shared through this channel are purely for educational and entertainment purposes only. They are by no means professional advice for individual/s to enter trades for investment or trading purposes.
The author/producer of these content shall not and will not be responsible for any form of financial/physical/assets losses incurred from trades executed from the derived conclusion of the individual from these content shared.
Thank you, and please do your due diligence before any putting on any trades!
EURGBP Long Setup - Jan 17 2022Due to TradingView's limitation on timeframe size, the most accurate Point and Figure charts are unable to be shared.
Trade idea is based on the $0.0005/3-box Reversal Point and Figure chart (1s timeframe)
Bullish Catapult pattern
Buy Stop @ 0.8365
Stop Loss @ 0.8340
Profit Target @ 0.8585
Move stop loss to break even or slightly into profit after 25 pips of profit are made. Trade valid until January 21st @ 1500 EST.
EURGBP ready for the bullish move? 🦐EURGBP on the daily chart is move since April 21 in a descending channel at the bottom of long downtrend.
A few attempts to break above the upper trendline has always failed and same we can say for the lower one.
Recently the price reached an important monthly support and start to consolidate exactly over the lower trendline.
In this case a pullback to the upside can be expected and IF the market will break above the resitance at the 0.83800 level we can set a nice long order according to the Plancton Academy rules.
–––––
Follow the Shrimp 🦐
Keep in mind.
🟣 Purple structure -> Monthly structure.
🔴 Red structure -> Weekly structure.
🔵 Blue structure -> Daily structure.
🟡 Yellow structure -> 4h structure.
⚫️ Black structure -> <4h structure.
Here is the Plancton0618 technical analysis , please comment below if you have any question.
The ENTRY in the market will be taken only if the condition of the Plancton0618 strategy will trigger.