May 23, 2024 09:56 GMT
EURGBP Highlights Importance of 0.85 Key Support
FOREX
- GBPUSD slips to session lows in recent trade, breaking out of a narrow overnight range as markets digest a busy Wednesday which included the hotter-than-expected CPI and the surprise announcement of a snap election. In similar vein, EURGBP has had a 25 pip bounce from session lows, assisted by the stronger-than-expected German PMI. Furthermore, participants will be aware of the 0.8500 handle marking an important support over the past 18 months.
- The cross has failed to close below 0.8500 since August 2022, with several tests over the past year being well respected.
- Technically we noted that Wednesday’s move resulted in a break of short-term support at 0.8531, the Apr 30 low, confirming an extension of the reversal that started May 9. Note that the key support and bear trigger lies at 0.8493, and a sustained breach of this point would be required to enhance bearish momentum.
- Despite betting markets expecting a smooth Starmer victory on July 04, both the expectation of an increase in political noise and the prospects of a Labour government for the UK economy could pose downside risks for sterling.
- With that said, if 0.8500 continues to hold in, markets will initially target a recovery towards 0.8566, the 20-day EMA. Above here, the Apr 23 high and bull trigger is at 0.8645.
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