Nick Nasad
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EUR/GBP - Further Good UK Macro Data May Help Extend Pair's Downswing

I have generally been a fan of the UK macro story over the last 2 months, and the fact that Mark Carney has come into the BOE and pursued a policy of "forward guidance" over more QE, have both given my the bias that the GBP can perform well (of course in forex we're always dealing in pairs, so we have to look at who relatively we can target to trade the GBP against).

My pick as the pair to go against was the EUR (in my first blog post here at WhoTrades), as relatively speaking I saw the ECB being more dovish because of the soft European economy than the BOE following what was a great Services PMI report and I stated some of my macro bias there. Yesterday we saw the EUR/GBP break an important support level at 0.8580, and I wanted to follow up here as we have some follow through after a retrace.

Mainly, I'm trying to see where this pair may go next. Now, we do have an important support trendline coming in that connects the lows from early May/late June which may provide support, but I am more inclined to think that we are back in the trading range we established during June between 0.86 and 0.8470. So, first and foremost we have to crack the 0.8435-ish area with conviction and hold that beachhead, but once we do, my targets to the downside would be the lows from June's range around 0.8470 and if that gives then the lows from early May at the 0.84 handle.

With a strong employment report this week in hand, we have 1 remaining macro event to act as a catalyst and that is the retail sales report. The expectations is a 0.7% gain for July. That should set up the condition for a bit more GBP strength, and if we come in on the topside a reason for traders to take out the trendline we have mentioned.

- Nick