- Intraday Comment
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26.02.2015, 1pm
The dollar was lower against almost all of its G10 peers during the European morning Thursday. It remained under pressure following the dovish comments by Fed Chair Janet Yellen at her semiannual testimony and ahead of the US CPI later in the day . The greenback was higher only against GBP, while it remained unchanged vs EUR.
The euro was stable after the GfK consumer confidence for March rose and German unemployment rate remained unchanged at 6.5% in February, its lowest level since German reunification. This added to the recent encouraging German data, supporting the positive sentiment in the first quarter.
In the meantime, Eurozone’s M3 money supply grew 4.1% yoy in January, at a faster pace than +3.8% yoy previously and better than expected. Loans to the private sector, a measure of economic health, continued to fall on a yoy basis but at a slower pace than in December. This may be a sign that the stimulative measures announced by the ECB in June and September may be starting to have some positive impact. This could support EUR somewhat at least temporarily.
The 2nd estimate of the UK GDP for Q4 was confirmed at +0.5% qoq and +2.7% yoy, in line with expectations. GBP/USD weakened a bit, but remained well above the 1.5500 support level confirming the overall appetite for the pound. The overall positive sentiment towards the UK economy and the fact that the Bank of England remains on track to raise rates are likely to keep GBP supported, especially against EUR.
EUR/GBP moved in a consolidative manner during the European morning Thursday, staying below the resistance hurdle of 0.7350 (R1). On the 4-hour chart, the price structure suggest a short-term downtrend, thus I would expect the rate to continue lower and to challenge the support zone of 0.7230 (S1) in the close future. In the bigger picture, the downside exit of the triangle pattern on the 18th of December signaled the continuation of the longer-term downtrend. Since then, the price structure has been lower peaks and lower troughs below both the 50- and the 200-day moving averages, thus I maintain my bearish view on the pair. However, I would stay cautious that an upside corrective bounce could be looming before the next leg down. This is because there is positive divergence between the daily MACD and the price action, indicating that although the rate is falling, the decline is slowing down.
• Support: 0.7230 (S1), 0.7100 (S2), 0.7025 (S3).
• Resistance: 0.7350 (R1), 0.7445 (R2), 0.7500 (R3).