Forex Analysis
According to the UK’s Office for National Statistics, gross domestic product (GDP) decreased by 0.3% in April. During the three months to April 2022, the UK’s GDP increased by 0.2%. There was a 0.3% decrease in services output, which was reflected in the significant decline of 5.6% in health care activity. Construction shrank by 0.4%, and production decreased by 0.6%. For the first time since January 2021, all significant sectors negatively impacted the monthly GDP estimate.
The EURGBP sentiment shows that 60% of traders on the ActivTrader platform are looking to go short the euro, which is a reasonable position if you only look at the central banks recent divergence in monetary policy. The pound is considerably weaker this morning based on the UK’s fundamentals, whereas the US dollar is stronger in anticipation of the Fed having to expedite further the rate increase by the FOMC to try and counter last week’s CPI print. With a strong US dollar, the weakening EURUSD and GBPUSD usually cancel each other out in the EURGBP cross. But today it looks as though we could be in for a higher timeframe breakout.
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The daily EURGBP chart shows price action consolidating above the 200-period EMA and under the 0.8590 level. On a monthly chart you can see that the current price action is trying to grind through what was a large balance area during 2021 and should the bulls win, a close above 0.87188 opens up the 0.8850 to 0.8900 area.
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This morning’s London session open breakout has made progress higher to a level confluent with a risk to reward ratio of 1:1. Should price reach for a measured move higher to the RRR 1:2 target of 0.8602 we will have cleared a lot of the recent range highs and could see the 0.8590 acting as support. Waiting for a breakout above the significant higher would be a wise decision rather than chasing price as it approaches the top of this intraday channel.