Two trades to watch: EUR/GBP, Oil

EUR/GBP rises ahead of data deluge

EUR/GBP is falling towards 0.84 parings yesterday’s rise, ahead of German and Eurozone data.

Yesterday German CPI inflation rose to 7.3% YoY in March, up from 7.2% in April. Today attention shifts to German GDP, which is expected to rise to 0.1% QoQ in Q1 after contracting -by 0.3% QoQ in Q4 2021. Rising inflation and slowing growth could fuel fears of stagflation.

Eurozone GDP is expected to show growth of 0.3%, while inflation is set to rise to 7.5%.

The pound has come under pressure recently amid concerns over the growth outlook. Worries that the BoE could tip the UK into recession if it hikes rates too quickly, causing investors to rein in BoE rate hike expectations across the year.

Where next for EUR/GBP?

Yesterday’s rebound lower from 0.8460/5 found support at the 100 sma at 0.8380. The long lower wick, combined with the move over 0.84 and the bullish RSI, keeps buyers optimistic about the further upside.

Buyers will need to overcome resistance at 0.8470, yesterday’s high, to attack the multi-month falling trendline at 0.85 and the March high at 0.85.

On the flip side, the 100 sma at 0.8380 offers immediate support ahead of 0.8350 the 50 sma. A move below here could negate the near-term uptrend.

Oil rises as demand concerns overshadow supply worries

 

Oil prices rose 3% yesterday and rose a further 1% today as Russian oil supply concerns overshadowed China’s lockdown concerns.

Oil is set to close the week higher as investors have weighed up tight supply and a slowing demand outlook across the week.

China has shown no sign of easing its zero-COVID policy and lockdown restrictions despite the economic cost of the policy and the disruption to supply chains.

Expectations for Russian supply to fall by as much as 17% next month are keeping the piece elevated. Yesterday Germany also dropped opposition to a Russian oil embargo, opening the door to sanctions on Russian oil and tighter supply.

OPEC+ is expected to meet next week, and no change in the current output plan is expected, so a previously agreed slight increase is likely.

Where next for oil prices?

The oil price has broken out to the topside of a symmetrical triangle, which, combined with the bullish RSI, suggests that there could be more upside to come.

Buyers will now look towards $110 to create a higher high ahead of $116, the March 24 high.

Support can be seen at 102.70, the 50 sma ahead of $100, the psychological level. It would take a move below $95 to create a lower low.