Two trades to watch: EUR/GBP, WTI oil

EUR/GBP extends gains as BoE could move to hike sooner. Oil prices keep on rising beyond $80.

EUR/GBP extends gains as BoE could move to hike sooner

EURGBP is pushing lower at the start of the new week, extending losses from the previous week.

The move lower comes after BoE policymaker Michael Saunders warned that households should brace themselves for a significantly earlier interest rate rise as inflationary pressure mount.

Rising energy prices and labour shortages mean that consumer inflation is expected to rise over 4% by the end of the year and remain elevated for longer than initially expected.

Meanwhile the ECB last week sent the Euro southwards after the minutes to the latest ECB meeting revealed that the central bank is looking into another bond purchasing programme for when the PEPP expires.

The central bank divergence is boosting GBP whilst dragging on EUR.

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Where next for EUR/GBP?

EURGBP trades at an intraday low below 0.86. The pairs trades below its descending trendline dating back to late September and below its 20 & 50 sma on the4 hour chart.

The RSI is supportive of further downside whilst it remains out of oversold territory.

Immediate support can be seen at 0.8475, last week’s low. A break below here could open the door 0.8450 August’s low and year to date low.

On the upside, resistance can be seen at 0.85 the confluence of the 20 sma and the falling trendline. A move above here could see 0.8525 horizontal resistance come into focus ahead of the 50 sma at 0.8550


Oil prices keep on rising beyond $80

Crude oil jumped again as the new week kicks off, extending solid gains from last week and trading at 7-year highs as the energy crisis tightens its grip.

Gas and coal prices have been surging as economies recover from the pandemic and economic activity picks up. The rise in the price of these commodities makes oil comparatively cheaper and more attractive.

There are reports of blackouts in some stats in India whilst China has ordered the ramping up of coal production as prices rally.

Meanwhile OPEC voted to stick to the output increase agreed in July.

US added five new oil wells last week.

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Where next for oil prices?

WTI oil price is extending its rebound from $61.79 on August 20 trading within the ascending channel from this date.

The RSI has tipped into overbought territory so there could be a period of consolidation or even a slight ease lower on the cards before an uptrend is resumed.

The price has pushed above $80 the round number and is heading for resistance at 81.98 the November 14 high and the upper band of the rising channel.

Support can be seen at 78.30/40 the October 4 high and October 8 low. Beyond here watch for 76.50 the September high and 74.80 October 7 low.

WTI oil chart



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