Two trades to watch: EUR/GBP, S&P500

Graphic of trading data chart
Fiona Cincotta
By :  ,  Market Analyst

EURGBP rises with inflation data due

EUR/GBP is heading higher on Friday, after a flat close in the previous session after mixed data from both the eurozone and the UK.

German retail sales rose 0.5% ahead of forecasts and rebounded after slumping by -5.4% in the previous session. However, the labor market showed weakness as the unemployment rate ticked higher.

The UK GDP confirmed the initial 0.8% reading, although household spending also dropped considerably.

Today all eyes are on Eurozone inflation which is expected to show that the consumer prices rose to 8.3% YoY in June, up from 8.1% in May, a new record high.

High inflation would mount pressure on the ECB to hike interest rates faster. A 25 basis point hike is expected in July.

Where next for EURGBP?

EURGBP continues to trend higher, holding above its 20 & 50 sma and its multi-month rising trendline. The RSI is above 50, keeping buyers hopeful of further upside.

Buyers will look for a meaningful move over 0.8625, the May high, to extend the bullish trend towards 0.8660, the June 30 high. A rose above here brings 0.8730, 2022 high, back into play.

Support can be seen at 0.8580, the rising trendline support and 20 sma. A break below here opens the door to 0.8550, the weekly low. A move below here could see sellers gain traction.

eurgbp CHART

S&P falls ahead of ISM manufacturing

The S&P fell -0.9% yesterday, and the futures are moving lower again today. Recession and growth fears have hurt market sentiment and continue to do so, heading into the new quarter.

Signs of inflation easing haven’t helped soothe the soring market mood. Yesterday US core PCE cooled for a third consecutive month.

Looking ahead, attention shifts to US ISM manufacturing PMI, which is expected to fall to 55 in June down from 56 in May. The tick lower represents the slowing growth and deteriorating industry expectations. However, the PMI is set to remain well above  50, which separates expansion from contraction.

Where next for S&P 500?

The S&P  has been trending lower since the start of the year. Technical indicators remain negative, suggesting that there is more downside to come. Sellers will look to break below support at 3700, the June 14 low, to bring 3635, 2022 low, into play. A break below here would create a lower low.

Should buyers take control, attention turns to 3810, the May 19 low, ahead of 3850, the 20 sma, and the 3938, the weekly high. A move above this level could see buyers gain traction.

SP500 Chart



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