Two trades to watch: EUR/GBP, FTSE

EUR/GBP rises ahead of ZEW German economic sentiment data

EUR/GBP is steadying after falling for the past two days. The euro continues to be weighed down by energy security fears as the Nord Stream 1 pipeline remains shut off for 10 days of annual repairs.

Fears that Russia won’t switch gas supply back on is hitting risk sentiment. A further reduction in gas supplies to Germany could lead to rationing and tip the eurozone’s largest economy into recession.

German ZEW economic sentiment data is due. Expectations are for German economic sentiment to slump in July to -38, down from -28 in June.

The pound is falling as rising inflation changes consumer habits promoting fears of a deeper downturn.

BRC retail sales fell 1.3% YoY in June, the fifth straight month of declines. BoE’s Andrew Bailey is due to speak later.

Where next for EUR/GBP?

After running into resistance at 0.8680 EUR/GBP has tumbled lower, falling through its multi-month rising trend line and its 50 sma. The price has found support at the 200 sma at 0.8443. The RSI is supportive of further downside while it remains out of oversold territory.

A break below the 200 sma could see the price fall to 0.84 the May 17 low, on its way to 0.8360 the May low.

Should the 50 sma hold, buyers could look to test resistance at 0.8490 yesterday’s high. A break above here exposes the 50 sma at 0.8540.

 

FTSE falls is risk off trade

The FTSE along with its European peers is heading lower. Concerns over rising COVID cases in China and recession fears are pulling commodity prices lower, dragging on heavy weight miners and oil majors.

The metal and mining index trades 2.1% lower at the time of writing.

The UK's new prime minister will be announced on 5th September. The first votes to start eliminating the candidates will begin. The fact that many candidates are looking to cut taxes at a time when inflation is at a 40 year high, suggests that they are missing the biggest treat to the UK economy.

Where next for the FTSE?

The FTSE ran into resistance at the 200 sma at 7355 in late June and rebounded lower. The price is currently consolidating capped on the upside by 7215 and on the lower side by 7080.

The 50 sma has crossed below the 200 sma in a death cross formation, which combined with the bearish RSI supports further downside. A break below 7080 open the door to 7000 psychological level and 6966 the June low.

Meanwhile, a break above 7215 exposes the 50 sma and horizontal support at 7355. A break above here creates a higher high.