Euro Notches New Trend Low, Momentum Turns Negative Versus Pound

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EUR/USD notched up at a new low at 1.0808 in the Asian time zone, subsequently recouping to the mid-1.0800s. Interest rate differentials continue to favor a strong greenback as yields in the U.S. climb as stocks continue to move higher. The Fed appears to be going down the track of boosting rates which will push more investors into dollar held assets. Optimism about the Greek deal has been fading, and Grexit concerns are likely to return next year.

The Euro has also lost substantial ground against sterling as the UK is also headed to rate tightening. Recent data have rekindled BoE tightening expectations, including the spike in average household income growth to +3.2% year over year from 2.7% in the three months to May, and BoE Governor Carney last week said during parliamentary testimony that a rate hike is drawing closer.

This week’s focus will be on the retail sector, and the BoE minutes to the July MPC meeting which are also up. The minutes will reveal a unanimous vote to maintain the repo rate at 0.5% and keep in the QE total at GBP 375 billion, and the tone to remain no more than cautiously hawkish.

The EUR/GBP cross currency pair sliced through trend line support at 0.6992, and retested that level on Tuesday. Further resistance is seen near the 20-day moving average at 0.7077. Support on the currency pair is seen near Friday’s lows at 0.6905. Momentum has turned negative as the MACD (moving average convergence divergence) index generated a sell signal. This occurs as the spread (the 12-day moving average minus the 26-day moving average) crosses below the 9-day moving average of the spread. The index moved from positive to negative territory confirming the sell signal.

The post Euro Notches New Trend Low, Momentum Turns Negative Versus Pound appeared first on Forex Circles.

Source:: Euro Notches New Trend Low, Momentum Turns Negative Versus Pound

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