Last night was a doozy when it came to big data and market movements, it’s rare to get such massive market movements in such a short time frame. A quick recap shows us some interesting numbers and some very nervous developments in the markets; especially when it comes to any Euro pairs.
US Non-farm Payroll data was solid at 288k jobs; well above the forecasts of 215k. Which in turn led to a drop in the unemployment rate, which now sits at 6.1%. At the same time Mario Draghi reassured the EU that the ECB would stimulate the economy via massive loans to banks for businesses and homes, in an effort to ward off deflation.
While on the flip side of data for this pair, the UK economy services PMI disappointed traders as it came out slightly weaker at 57.7. Regardless of this the UK economy is still showing an expansion its largest sector – services – which makes up 80% of the economy. What many will be wondering now is if the EUR/GBP will actually swing even lower.
On the chart it’s very much clear that there has been a downward trend for some time and this is unlikely to change anytime soon, what is clear though is the current point on the channel lower. We have seen numerous pullbacks every time we have seen a touch, but this has so far remained relatively solid and not pulled back entirely just yet.
If the channel holds expect to see a push upwards to resistance levels at 0.8028 and 0.8088, followed by further pushes lower upon pushing to such levels. This seems like the most likely scenario given how long the channel has held for, and as there is still uncertainty surrounding the ECB deal that Mario Draghi is pushing for banks in Europe.
In the event of today’s candle closing below the channel and then opening lower on market open on Sunday night, then I expect that we will see far more aggressive bearish play. I would expect to see a much more aggressive trend line lower (as seen from the chart below)
Overall, the EUR/GBP is looking very good for any sort of movement, whatever direction taken will likely play into the hands of either a long or a short. It could go south, but history says otherwise as can be seen on the channel. Close attention will be key for such a play.