Euro and sterling target further upside

Both sterling and euro attempt to retrace steep losses against the dollar.

Five and ten pound notes
Source: Bloomberg

Sterling rallies following a sharp decline

Heading into the London open session GBP/USD was trading at $1.5313, up 0.19% as it began recovering from a sharp fall in overnight markets. This saw a low of $1.5173, capping a bearish run which – since December 31 – has seen a -2.86% decline.

Today’s release of the UK’s construction PMI data is expected to show a deceleration from November’s 59.4 to 59.0 in December, and if achieved it may be sufficient in stemming any further declines on Monday.

The sharp decline from $1.5620 to a low of $1.5173 unsurprisingly resulted in a deeply oversold market, with an RSI reading of 6.5 coinciding with the low. This has since pushed higher to 34.2 – a level which still may allow for another retest of the recent lows.

Intermediate support/resistance levels: downside resistance appears to present itself at the $1.5253 level, which if held could see a retest of topside support at $1.5375. 

Euro shakes off weak Spanish employment data

EUR/USD is currently trading at $1.1968, up +0.14% on Monday despite Spanish unemployment change data underwhelming market expectations. The reading came in at -64.4k vs expected -72k, beating its previous monthly print of -14.7k.

The move higher comes after a sustained move lower which saw a low of $1.1864 posted during overnight trading – a move which continues to be supported by the 50-,100- and 200-day moving averages. The pair’s RSI indicator has managed to rally to 39.6 but remains an area of worry for euro bulls.

Intermediate support/resistance: downside resistance should come into play at the $1.1898 level, which if held should see a continued reversal to retest topside support. In the short term this looks to reside at the 50-DMA which is currently trading at $1.2042.

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

CFD’s zijn complexe instrumenten en brengen vanwege het hefboomeffect een hoog risico mee van snel oplopende verliezen. 79% van de retailbeleggers lijdt verlies op de handel in CFD’s met deze aanbieder.
Het is belangrijk dat u goed begrijpt hoe CFD's werken en dat u nagaat of u zich het hoge risico op verlies kunt permitteren.
CFD’s zijn complexe instrumenten en brengen vanwege het hefboomeffect een hoog risico mee van snel oplopende verliezen.