EURGBP: EUR to GBP Bearish Flag Hints at More Downside
The EUR to GBP (EURGBP) is little changed as traders react to the strong German factory goods order numbers. It is trading at 0.9070, which is in the same range it has been in the past few days.
EURGBP fundamental analysis
European data released recently is sending mixed signals about the recovery. Yesterday, data from the UK showed that the services and composite PMIs declined to 56.1 and 56.5, respectively. In the Eurozone, the services PMI declined to 48.0, which is a sign that the recovery has stalled. However, data also showed that retail sales rose by 4.4% in August.
Today, data from Germany showed that factory orders increased by 4.5% in August. That was better than the 2.6% increase that analysts were expecting. The orders declined by 2.2% on a year-on-year basis because of the pandemic. Domestic orders rose by 1.7% while those from overseas rose by 6.5%. Most of these orders were in the struggling automotive industry.
German factory orders have been in the positive zone in the past four consecutive months after they fell by 26.2% in April.
The EURGBP will also react to the closely-watched UK construction PMI data that will come out at 08:30 GMT. Analysts polled by Reuters expect the data to show that the PMI fell from 54.6 in August to 54.0 in September.
Also, the EUR to GBP will react to any new information on Brexit. While last week’s talks ended without a deal, investors are optimistic that the two sides will make some progress before October 15.
EUR to GBP technical outlook
The four-hour chart shows that the EURGBP pair has been moving sideways in the past few days. As such, it is along the pivot point level that is shown in black. It is also along the 50% Fibonacci retracement level. This retracement connects the highest and lowest levels in September. It is also slightly below the 25-day EMA.
Most importantly, the pair has formed a bearish flag pattern that is shown in green. This means that the near term outlook is bearish, meaning that it is likely to move to the support at 0.9045. However, a move above the resistance at 0.9100 will invalidate this trend.