EUR/GBP: Short At 0.7435
GROWTHACES.COM Forex Trading StrategiesTaken PositionsEUR/GBP: short at 0.7435, target 0.7290, profit locked in at 0.7430, risk factor *More profitable strategies – GrowthAces VIP Subscription OnlyEUR/GBP: All Eyes On BoE This Week(short at 0.7435)
- British services PMI fell for the third month in succession to 53.3, from August’s 55.6, indicating the weakest rate of growth since April 2013. PMI showed some firms reported hesitation among clients in placing new contracts, linked to global economic uncertainty. The forward-looking indicator for business expectations fell to a 13-month low in September, but still signaled solid overall growth. What is important, employment at service providers rose at a stronger rate in September.
- PMI data indicate that GDP growth slowed to 0.5% in the third quarter, but that the economy is entering the fourth quarter at a pace down to just 0.3%. At the moment, sustained strong hiring in services and construction suggests that companies are generally expecting the slowdown to be short-lived.
- The GBP/USD reaction to weaker US non-farm payrolls on Friday was limited, as we expected. Expectations for a Fed hike are strongly correlated to expectations for a BoE hike, so weaker US data mean later monetary tightening in the UK. The EUR/USD reaction was much stronger and as a result the EUR/GBP went up on Friday and we used this jump to go short at 0.7435.
- This could be an important week for the GBP traders. On Thursday, October 8, the BoE announces its monetary policy decision and publishes the minutes of its meeting. We expect no change in policy. However, the minutes are likely to be significantly “less dovish” than the market is expecting – see our yesterday’s The Week Ahead for a rationale. Relatively hawkish minutes should support our short EUR/GBP position.
EUR/GBP Forex Daily Chart
Significant technical analysis’ levels:Resistance: 0.7442 (high Oct 2), 0.7482 (high May 7), 0.7510 (high Feb 5)Support: 0.7371 (10-dma), 0.7350 (low Oct 2), 0.7348 (38.2% of 0.7197-0.7442) Source: Growth Aces Forex Trading Strategies