EUR/GBP Continues the Free Fall

Backed by significant economic figures, EUR/GBP continues the  free fall, quickly approaching the next line of support. Here’s an update on this cross.

EUR/GBP continues to be a rather predictable currency pair. The support and resistance lines are more clear here than in many other pairs.

Strong British inflation

British inflation is lifting its head. After rising to an annual rate of 1.9% last month, it leaped to 2.9% this time. A rise to 2.6% was predicted. This leap almost reached the government’s inflation target of 1-3%. Also Core CPI surprised by jumping to 2.9% rather than 2.3% that was predicted, and the RPI (Retail Price Index) completed the picture with a rise to 2.4%, exceeding expectations and also leaping from 0.3%. RPI has been negative for many months.

If the CPI was little higher, and Mervyn King would have to send an open letter explaining the reasons for this and laying out the means he thinks of using against it – a rate hike in the near future. BOE Governor Mervyn King will make a public appearance anyway later. The Pound enjoyed this data and continued to rise. GBP/USD already reached 1.6450.

Weak European sentiment

Just 30 minutes after this British release, German ZEW Economic Sentiment disappointed with a big drop – from 50.4 to 47.2, much worse than expected. Also the all-European ZEW Economic Sentiment fell to 46.4 instead of rising to 48.2. This repeats last month’s ZEW disappointment which sent the Euro down.

EUR/USD reacted with a sharp drop from 1.44 to 1.4310 and it hasn’t stopped yet.

EUR/GBP continuing south

EUR/GBP broke the support line last week on other figures, and got new fuel to continue the journey down. It’s now trading at 0.8730, quickly approaching the 0.87 support line. Looking below, 0.8570 is a minor line of resistance, 0.8450 is stronger and 0.84 is huge – it wasn’t breached in over a year.

If there’s a correction, 0.8840 now serves as a resistance line. The direction continues to be down.

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Yohay Elam

Yohay Elam

Yohay Elam: Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I've accumulated. After taking a short course about forex. Like many forex traders, I've earned a significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I've worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.