- EUR/GBP declined heavily below the 0.8400 and 0.8350 support levels.
- In the past few days, EUR/USD fell significantly, while GBP/USD recovered.
- The UK CPI increased 1.8% in Jan 2020 (YoY), more than the 1.6% forecast.
- The UK Retail Sales is likely to grow 0.7% in Jan 2020 (YoY), less than the last 0.9%.
EUR/GBP Technical Analysis
This month, the Euro declined heavily from well above 0.8450 against the British Pound. EUR/GBP even dived below the 0.8400 support level to enter a bearish zone.
Looking at the 4-hours chart, the pair settled below the 0.8350 support area, the 100 simple moving average (red, 4-hours), and the 200 simple moving average (green, 4-hours).
It opened the doors for more losses and the pair even spiked below 0.8300. The pair traded as low as 0.8281 and it is currently consolidating losses.
On the upside, an initial resistance is near the 0.8365 level. If the bulls gain strength above 0.8365, the pair could recover towards the 0.8400 resistance or the 50% Fib retracement level of the downward move from the 0.8504 high to 0.8281 low.
Conversely, the pair could continue to move down below 0.8300 and 0.8285. In the mentioned case, the pair is likely to decline further towards the 0.8250 and 0.8240 levels in the near term.
Fundamentally, the UK Consumer Price Index for Jan 2020 was released by the National Statistics. The market was looking for a 1.6% rise in the CPI, compared with the same month a year ago.
However, the result was well above the forecast, as the UK Consumer Price Index increased 1.8%. It is also well above the last 1.3%. Looking at the monthly change, the CPI declined 0.3% in Jan 2020, whereas the market was looking for a 0.4% decrease.
The report added:
The largest contribution to the CPIH 12-month inflation rate in January 2020 came from housing, water, electricity, gas and other fuels (+0.55 percentage points), which increased by 0.19 percentage points since December 2019.
Overall, the British Pound remained well bid against the US Dollar and the Euro. In the short term, there could be a minor upside correction in EUR/GBP, but it is likely to face hurdles above 0.8400.
Upcoming Economic Releases
- Germany’s GfK Consumer Confidence for Mar 2020 – Forecast 9.8, versus 9.9 previous.
- UK Retail Sales for Jan 2020 (YoY) – Forecast +0.7%, versus +0.9% previous.
- UK Retail Sales for Jan 2020 (MoM) – Forecast +0.7%, versus -0.6% previous.
- US Initial Jobless Claims – Forecast 210K, versus 205K previous.