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EUR/GBP Dips to New Low on the Year after Central Bank Announcements

Today we got the BoE interest rate announcement, followed by one from the ECB and a press conference.

While the Bank of England held its interest rate, the ECB cut the benchmark rate to a new record low of 0.15%, and became the first central bank to move deposit rate to negative, from 0% to -0.10%. After the press conference, you get the sense that the bank is still dovish, as Draghi noted "we are not done yet", in reply to a question about why the bank didn't do QE outright.

Meanwhile, the Bank of England is looking at the other direction. It is only not raising rates because the economic recovery has not be strong enough and inflation is low. 

The diverging outlook of the central banks should pressure the EUR/GBP, and it did. 


(EUR/GBP 4h chart 6/5)


EUR/GBP broke below a recent low on the year of 0.8080, tagging 0.8065 before buyers swooped in at this new 2014-low. 

At this point the downside is to test the 0.8000 psychological handle. If price falls below 0.7950, there is further room towards the 2012 low of 0.7755.

A break above 0.8150 however would represent a washout, and a bullish reversal, especially if it breaks above a falling trendline from March.

Which side of 0.8110, central pivot, would the EUR/GBP end up after today's post-central-bank reaction? If it is above 0.8110, the focus remains on the 0.8150, falling trendline. Staying below 0.8110 should maintain bias toward the 0.80 handle.