European vaccines will eventually get there: EUR/GBP
Joe Perry April 6, 2021 4:08 PM
Despite the current lockdowns in Europe, the vaccine news to is positive for the Euro.
In an internal memo seen by Bloomberg, the European Union expects to have most citizens vaccinated by the end of June. As discussed in the Week Ahead, France and Italy are under lockdown until nearly the end of April. There is also the possibility that Germany may be there soon. With the current lockdowns and restrictions, vaccinating nearly 70% of Europe’s population would be an impressive feat! The rollout has been extremely slow in Europe. This is partly due to the fits and starts of the AstraZeneca vaccine due to the possibility that is related to blot clots. It is also partly due to the UK gobbling up manufacturing contracts before the EU even had a chance. With the weak US Dollar over the past couple of days, it’s not a surprise EUR/USD would be stronger. However, the Euro is stronger vs other currencies as well, particularly the Pound.
EUR/GBP had broken lower from a long-term symmetrical triangle on January 13th and has been moving modestly lower since. Price bounced from February 24th to February 26th and recently has been in a descending triangle. Yesterday, the pair reached the 127.2% Fibonacci retracement from the February 24th lows to the February 26th highs, near 0.8485. That support has held so far. The combination of the support, the price divergence with the RSI, and the hopeful vaccine news out of Europe, makes a perfect recipe for EUR/GBP to move higher and squeeze out shorts!
Source: Tradingview, FOREX.com
Where can the pair run into resistance? The first level is the downward sloping trendline dating back to February 26th, near 0.8600. This is also the 50% retracement level from those same highs to yesterday’s lows. Horizontal resistance above there is near 0.8650 and then the February 26th highs near 0.8731. Horizontal support is just below at previous resistance near 0.8535 and then yesterday’s lows near 0.8472. If EUR/GBP breaks below there, price can fall to the 161.8% Fibonacci retracement extension from the previous mentioned timeframe near 0.8419. After that, there is a big drop down to previous lows from February 2020 near 0.8284 where bulls may be looking to buy (see daily).
Source: Tradingview, FOREX.com
Traders are forward looking. Despite the current lockdowns in Europe, the vaccine news to is positive for the Euro. If the news continues to be positive, expect the Euro to continue higher, especially vs currencies which have already priced in positive vaccine news (EUR/GBP and EUR/USD). However, if the news turns negative (i.e., more negative news regarding AstraZeneca or a continued slow rollout), the short squeeze may be over, and the Euro may continue its recent trend lower.
Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.