Jump to content

Cable, EUR/GBP Sink to Multi-Year Lows – New Key Levels to Watch


Recommended Posts

GBP/USD (CABLE), EUR/GBP ANALYSIS

  • Cable (GBP/USD) sinks below significant zone of support as the liquid, safe-haven US dollar soars
  • European economy susceptible to double-pronged squeeze: demand and supply
  • EUR/GBP drops below 2020 low: New key technical levels analyzed
Euro Price Latest – EUR/USD Crumbles on US Dollar Demand, EU Growth Worries

CABLE VULNERABILITY ACCELERATES

GBP/USD has been trending lower since the 2021 high, albeit in a rather choppy fashion. The latest spate of volatility however, has broken new ground - to the downside - and now approaches 1.3000.

The US dollar remains heavily bid as conflict in Ukraine and increasing economic sanctions against Russia add to the uncertainty surrounding global financial markets. The Pound, which benefitted from accommodative monetary and fiscal policy during the recovery, has taken a turn for the worse as global risk appetite sours.

Cable broke through the previous major zone of support (1.3200 – 1.3280), now testing the December 2021 lows around 1.3160. The daily chart shows that there is little standing in the way of continued selling with the psychological level of 1.3000 as nearest support with 1.2770 thereafter.

However, the pair has just entered oversold territory according to the RSI, meaning there is a slight chance we see a minor retracement. It is important to keep in mind that in strong trending markets (particularly when trading USD crosses during global conflict) that markets can remain in oversold/overbought territory for extended periods of time. Therefore, such indicators can be viewed as presenting the possibility of a minor reprieve which GBP/USD bears could look to for better entries into the existing trend.

GBP/USD Daily Chart

Cable, EUR/GBP Sink to Multi-Year Lows – New Key Levels to Watch

Source: IG, prepared by Richard Snow

 

EUROPEAN ECONOMY SUSCEPTIBLE TO DOUBLE-PRONGED SQUEEZE

The Euro has declined with no real end in sight. Relatively accommodative monetary policy compared to other major central banks (Fed, BoE) has resulted in weaker EUR/USD and EUR/GBP crosses.

The European economy is vulnerable to supply and demand side challenges. On the supply side, supply chain disruptions will weigh on production, while higher energy costs and a lower purchasing power of the Euro are set to curb demand.

Adding to the mix, the diverging paths of monetary policy as the Bank of England is expected to have raised rates a further 4 or 5 times by the time the European Central Bank is anticipated to hike for the first time, in Q4 this year. An increasing interest rate differential favors the Pound to the detriment of the Euro and market participants will be listening intently to what ECB President Christine Lagarde says at the March 10th ECB Meeting regarding the economic impact of the Ukraine conflict and the timing of future rate hikes.

Looking at the EUR/GBP pair, trading continues below the 2020 low of 0.8275. In fairness, the pair was already well on its way to trading below the 2020 low, the conflict in Ukraine just accelerating the longer-term downtrend.

EUR/GBP Daily Chart

Cable, EUR/GBP Sink to Multi-Year Lows – New Key Levels to Watch

Source: IG, prepared by Richard Snow

The significance of the long-term downtrend amid the recent volatility really becomes apparent when a weekly chart is needed to gauge future levels of support. In the case of EUR/GBP, those levels are 0.8125 and 0.8040.

EUR/GBP Weekly Chart

Cable, EUR/GBP Sink to Multi-Year Lows – New Key Levels to Watch

Source: IG, prepared by Richard Snow

 

MAJOR RISK EVENTS IN THE WEEK AHEAD

Last weeks NFP print reminded markets that ‘high importance’ event risk is still relevant within the context of the Russia-Ukraine conflict. This week, we have two stand out events: ECB rate decision and US inflation data.

The Euro could regain some losses on Thursday if market participants perceive Christine Lagarde’s comments as hawkish, in a similar fashion to the previous ECB presser. US CPI data could land up having little effect on the in-demand dollar. Adding to this, Jerome Powell all but confirmed there would be a 25 basis point hike on the 16th of March.

Cable, EUR/GBP Sink to Multi-Year Lows – New Key Levels to Watch

Customize and filter live economic data via our DaliyFX economic calendar

 
 

--- Written by Richard Snow for DailyFX.com. 7th March 2022

Link to comment

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
  • General Statistics

    • Total Topics
      23,663
    • Total Posts
      97,146
    • Total Members
      44,216
    • Most Online
      7,522
      10/06/21 10:53

    Newest Member
    AitorIG
    Joined 08/12/23 11:57
  • Posts

    • Insightful write up. Personally, I use top down analysis to mark my pivot points and i prefer to call them zones. As seen from my ETH chart below, i have been swinging the bullish ride with my top down analysis. 
    • One exchange that checks the box interms of my own requirement is bitgetglobal. The exchange is reputable for been compliant with regulations globally, its copy trading is the largest with over 100k elite traders and 540k followers, its trading fees is amongst the lowest in the industry. The one area i feel they need to improve on is their P2P. This area is lagging compared to that of Binance and Bybit.
    • Here's the next set of TIME CYCLES - I've had these dates on my charts since 2015 ish Please note this is just to show you that the markets are not random and we can TIME them - the AIM of this thread is to SHOW you that dates calculated years in advance can be significant These Time Cycles are not all of them, just the ones I wanted to show you, which are the INTERNAL cycles of a bigger Time Cycle - some will hit and some won't - REMEMBER, lots of active cycles are ALL operating at the same time Notice that there's not a TC for the 2022 high - the reason is that there was one, it's just not part of this series of TC's I'm showing you - Then when we look backwards in 2034, you'll be able to see market price action around the dates and you will KNOW these are not random dates thrown on a chart in the hope of hitting - because If you are ignore the latter dates (not yet shown) in the cycle, then you will come a cropper and when Investments are concerned that will mean LOSING lots of your money I'm still using the screenshot taken in Oct 2020 - Once we complete 2025, I'll update the chart with price data and take a screen shot from then on for the next cycles The THICK BLACK line is the mid-point of the cycle, which in the grand scheme of things "should / is expected to be" a significant LOW point when viewed back in time from 2034! - It WILL NOT be a major low, so don't expect a humungous price crash to it, it will NOT be how you are imagining it in your head right now Notice that most of those cycles are "LINKED" that's because they are the same cycle which repeats THT
×
×
  • Create New...
us