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EURGBP Takes a Break From Its Sell-Off; Can It Find Support With Today’s Roster of Reports?

EURGBP Rebounds

EURGBP is trading slightly higher in today’s trading after it sold off sharply yesterday following a German court’s ruling on the ECB’s QE program. As of this writing, the currency pair is up by 7 pips from its opening price at 0.8718. Will it tank or rally with today’s economic reports?

German Court’s Ruling

Yesterday, a German court ruled that the ECB’s recent bond-buying program is legal under German law. This news was better than what some investors had braced for which was for it to be considered illegal. However, the court mandated that the German government needed to study the proportionality of the program. Consequently, this sent EURGBP lower because it hints that the central bank will have less leeway to provide support for the economy.

Economic Data Due from the Euro Zone and UK

Today, there are a few reports due from the euro zone and the UK which could move EURGBP. They kick off at 8:50 am GMT and 8:55 am GMT with the French and German final services PMIs for March. They are anticipated at 10.4 and 15.9, respectively. Then at 9:00 am GMT, the euro zone final services PMI is eyed at 11.7.

Then at 9:30 am GMT, the UK construction PMI report for April is seen at 21.5. This will then be followed by the euro zone retail sales report for March which is estimated at -11.2%.

The European Commission will also release its economic forecasts today (with no definite schedule). 

Better-than-expected euro zone data, disappointing UK PMI, or optimistic forecasts from the European Commission could be bullish for EURGBP. On the other hand, negative euro zone data, positive UK PMI, or pessimistic forecasts could push the currency pair lower.

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EURGBP Outlook

On the 1-hour time frame, it can be seen that EURGBP has spent the past few trading sessions in a tight consolidation. Because this follows a sharp drop, a bearish pennant chart pattern has formed. This is considered as a bearish continuation pattern and a close below yesterday’s low at 0.8689 could trigger a drop to the low of April 30 at 0.8670. If support at that price does not hold, the next floor could be at 0.8616 where EURGBP bottomed on March 5.

Conversely, a bullish close above the top of the consolidation at 0.8729 could mean that there are still buyers left. EURGBP could then trade higher to 0.8770 where it found support on May 4.

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