- Summary:
- EURGBP gave up all of its gains yesterday after it tapped its highest levels for 3 months. Technicals suggest more downside potential ahead.
EURGBP initially began yesterday’s trading on a bullish trajectory as the euro zone PMIs topped expectations. The currency pair rallied to its highest levels since March at 0.9077. However, the currency pair quickly gave up its gains after the UK released its own set of PMIs. EURGBP fell and closed at 0.9030, just 1 pip above where it opened.
All PMI reports from the euro zone exceeded expectations. The French services PMI printed higher at 50.3 than its 44.9 consensus. Meanwhile, the country’s manufacturing PMI came in at 52.1 versus the 46.1 forecast.
As for Germany, the services PMI was at 45.8 while the manufacturing PMI printed at 46.9. Their estimates were at 40.5 and 43.8, respectively.
Finally, the euro zone-wide services PMI topped its 40.5 consensus when it came in at 47.3. As for the region’s manufacturing PMI, the actual figure was at 46.9, higher than the forecast at 43.8.
For the UK, the country’s manufacturing sector for June came in higher than the 50.0 baseline reading which indicates expansion. It printed at 50.1, better than estimates at 45.2. As for the country’s services PMI, it came in at 47.0 which was also higher than its consensus at 39.1.
Why was the GBP stronger than the euro? It may have been because the UK began to unwind its lockdown restrictions yesterday. This development could have sparked excited among investors for the country’s growth as economic activity picks up.
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EURGBP Outlook
On the 4-hour time frame, it can be seen that EURGBP was unable to trade past last weeks highs at 0.9068. Consequently, a double top chart pattern has formed. When you enroll in our free forex trading course, you will learn that this is widely considered as a bearish reversal signal. A strong close below the neckline support around 0.9017 could mean that the currency pair could soon fall to the confluence of support at 0.8975. This price coincides with the 61.8% Fib level (when you draw from the low of June 16 to yesterday’s high) and the rising trendline (from the low of April 30, May 6, May 11, June 9, and June 16).
On the other hand, a strong close above yesterday’s high at 0.9077 could mean that the double top on EURGBP has been invalidated. The currency pair could soon then rally to 0.9312 where it peaked on August 12, 2019.