Euro at Risk of More Declines Vs USD and GBP

Key Highlights

  • The Euro declined heavily this week against most major currencies, including US Dollar and British Pound.
  • A crucial bearish trend line with current resistance near 0.8790 protected gains on the daily chart of EUR/GBP.
  • The Euro Area CPI in April 2018 increased 0.3% (MoM), similar to the forecast.
  • The yearly change in the Euro Zone CPI was 1.2% in April 2018.

EURGBP Technical Analysis

The Euro faced a lot of selling interest recently against the US Dollar and British Pound. The EUR/USD pair declined below 1.1800 and EUR/GBP was rejected from a major resistance near 0.8800.

EURGBP Technical Analysis Euro British Pound

Looking at the daily chart of EUR/GBP, the pair started a decent upside move from the 0.8620 support in April 2018. It moved above the 38.2% Fib retracement level of the last decline from the 0.8967 high to 0.8620 low.

However, the upside move was capped by a crucial bearish trend line with current resistance near 0.8790. Moreover, the pair struggled to settle above the 0.8800 level and the 100-day simple moving average (red).

Lastly, the pair was rejected from the 61.8% Fib retracement level of the last decline from the 0.8967 high to 0.8620 low. The pair is currently declining and is trading well below 0.8780.

It may continue to decline towards the next support at 0.8720 and 0.8700. On the upside, a break above 0.8790 and 0.8800 is required for further gains in the near term.

Recently, the Euro Consumer Price Index for April 2018 was released by the Eurostat. The market was looking for a rise of 0.3% in the CPI compared with the previous month.

The actual result was similar, and the yearly change was also in line with the forecast of 1.2%. The report mentioned that:

The lowest annual rates were registered in Cyprus (-0.3%), Ireland (-0.1%) and Portugal (0.3%). The highest annual rates were recorded in Romania (4.3%), Slovakia (3.0%) and Estonia (2.9%). Compared with March 2018, annual inflation fell in twelve Member States, remained stable in one and rose in fourteen.

Overall, the Euro is in a bearish zone versus the US Dollar and British Pound. It may correct higher, but upsides are likely to remain capped in EUR/USD and EUR/GBP.

Economic Releases to Watch Today

  • US Initial Jobless Claims – Forecast 215K, versus 211K previous.
  • Canada’s ADP Employment Change April 2018 – Forecast 32.0K, versus 42.8K previous.

Aayush Jindal

Aayush is a Senior Forex, Cryptocurrencies and Financial Market Strategist with a background in IT and financial markets. He specialises in market strategies and technical analysis, and has spent over a decade as a financial markets contributor and observer. He possesses strong technical analytical skills and is well known for his entertaining and informative analysis of the currency, commodities, Bitcoin and Ethereum markets.

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