A.Weber: trading GBP/USD and EUR/GBP
Technicals for GBP/USD and EUR/GBP
GBP/USD has once again recovered above the $1.5200 mark on Thursday. I recommend buying the cable at the current levels. The pair is forming a kind of an inverse head-and-shoulders formation (see the H4 chart). We see space for a more bullish correction. Break above $1.5250 will open the way to $1.5300, $1.5375 and $1.5490. Major support lies at $1.5500.
Chart. H4 GBP/USD
Diverging BoE and ECB monetary policies remain a bearish factor for EUR/GBP, so I see a good selling opportunity at the current levels. As can be seen from the H4, the pair has recently broken the rising wedge to the downside, resuming the medium-term decline. Next targets are seen at 0.7400 and 0.7380 (200-month MA). The 0.7600 area acts as a resistance.
Chart. H4 EUR/GBP
The British currency remains well supported this week. There are 2 major reasons for the cable’s strength: the upbeat UK January PMIs and the overall bearish USD correction.
The BOE monetary decision will be announced today at 12:00 GMT. The central bank is widely expected to leave policy unchanged in February. There will be no statement released, so the attention will be glued to the next week’s inflation report (Feb. 12) and the meeting minutes (Feb. 18).
Inflationary pressures in the UK economy remain subdued, giving the BOE a reflection period. Consumer prices rose by 0.5% y/y in December compared to 1% growth in November. This was the lowest reading since May 2000.
As for the US data front, traders focus on the US non-farm payrolls on Friday. According to the consensus forecast, the reading lowered from 252K to 236K in January. This could become another medium-term negative factor for the US dollar.