We have been watching the EURGBP currency pair rip past resistance levels for the last few weeks. Political turmoil and investor uncertainty has caused severe loses in the British currency but just like all moves in the market this move too must have a correction. Because the move is so pronounced and has little fundamental support in the coming week we recommend keeping a close eye for a potential turnaround. CPI data for Great Britain is due to come out on Wednesday May 22nd and we expect good numbers due to the rhetoric coming from the Bank of England. Out of all the G7 banks, the BoE is one of the most hawkish. Mark Carney the Governor of the Bank of England has made it clear that they will not lower interest rates any time soon and that their economy is strong despite signals of global slowdown. Trade wars barely affect the British currency as they are currently in the process of drafting up new trade agreements.
Out of Europe we will see German services and manufaturing PMI which will indicate as to how the business climate is fairing in the economic powerhouse of Europe. Also we will get a chance to read the ECB financial stability review on Thursday May the 23rd which will give us a better understanding of the risks the Eurozone is facing. German bond yeilds have dropped into negative territory on the 10 year bunds.
A reversal is expected soon, but first we will see a correction. The global trend is confirming the validity of the trade.
As soon as we have a reversal pattern or two days of lower lows and lower highs this is a good entry point. A stop loss can be set around the level of 0.8800. Our target level is the 50 .