- Loses the 0.88 handle as UK MPs vote on Lords amendments.
- The UK won the first vote to overturn the Lord’s defeat on the EU withdrawal bill by a majority of 22
- “Assume an immediate upside bias above the 0.8719 support line – Commerzbank.
EUR/GBP has just lost the 0.88 handle and has dumped from 0.8828 to the 100-hr SMA at 0.8994 on Brexit related noise. The UK won the first vote to overturn the Lord’s defeat on the EU withdrawal bill by a majority of 22.
The Guardian reported that ‘The government has won the first vote. It has voted down the Lords amendment on the sifting committee by 324 votes to 302 – a majority of 22. There will be more to come over the next couple of days and the following insights from TD Securities offer a good foundation to be prepared when trading the cross, EUR and cable:
- Brexit: the 15 amendments in brief – TDS
- Brexit: likelihood of key amendments passing – TDS
- Brexit: FX market outlook & strategy looks to 0.8965 or 0.8700 – TDS
So far, the downside towards 0.87 is playing out while the pound recoups losses on the earnings data from earlier where cable fell to 1.3380 on the knee-jerk. However, the larger than expected rise in employment was the silver lining for GBP bulls. On the other side of the cross, all ears are pinned back expecting an action-packed day from central banks with the FOMC and ECB taking the limelight. It is worth keeping an eye on the German/US 10 year spread while it has been tightening by 14bp since the end of May, (EUR/USD & EUR/GBP bullish). On EUR/USD, bulls need a close above 1.1909. Cable is making its way towards the top of the hourly channel’s resistance and needs to get over 1.3420 and then 1.3443 to make any material impact on the cross ahead of the ECB this week.
EUR/GBP levels
The 100-D and 21-D SMAs guard a break down back into the descending channel; these can be located at 0.8787 and 0.8763. However, the price still has no clear direction. The bulls need to get through the 200-D SMA at 0.8832. The 0.8846 7th May high and the 55-week moving average is located at 0.8859. On a follow-through, we have the 0.8969 recent high and the 0.9034 October 2017 high as key upside targets. To the downside, 0.8700 and the double bottom lows are exposed at 0.8697, guarding the downside support of the descending channel. 0.8620 protects a run towards 0.8526 as being the 78.6% retracement of the move from 2017 on the wide.
Analysts at Commerzbank explained that they will assume an immediate upside bias above the 0.8719 support line and only below here will trigger losses to the 0.8697 end of May low and the 0.8620 April low.
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