Forex Video Briefing (11/6) – EUR/GBP after ECB/BoE
This week, the EUR/GBP has been consolidating roughly between 0.78 and 0.7863. Heading into the central bank statements, the pair looked like it was ready to build a price bottom. The Bank of England went first. It maintained its minimum bid rate at 0.50%, and kept its asset purchase program at £375bn. The slowdown in Europe is impeding the BoE from raising rates until probably the latter half of 2015. The EUR/GBP pushed higher after the BoE statement, but held at the consolidation resistance of 0.7863.
Then the ECB made its statement, holding the minimum bid rate at 0.05%, and holding off from further stimulus though the economic decline and low inflation is adding pressure for the bank to implement QE. It does leave the door open for QE, and the market believes that its non-focus on the balance sheet suggests the bank is gearing up for QE. Draghi also reiterated the bank’s readiness to act, though it maintained that it wants to assess the measures already in place.
EUR/GBP is now testing the 0.78 low on the week, and at first finding some support. Let’s see what happens if price gets back to the 0.7830-40 area. A market that is bearish should hold price below this area. The bearish scenario has the 0.78 then the 0.7765 low on the year in sight.
However if price pops up above 0.7840, we might have to shelve the bearish outlook for further consolidation or bullish correction, though we will have to monitor for resistance again in the 0.79-0.7910 area since the prevailing trend is still bearish.