EURGBP: Why is the EUR to GBP reversing course today?

The EUR to GBP (EURGBP) pair rose by more than 0.25% today as traders reacted to a weak car sales numbers from the UK and the weaker-than-expected German factory orders. The pair is trading at 0.9040, which is the highest it has been in three days.

UK auto sales dropped in June

The automobile sector in the UK is in trouble, according to preliminary data by the Society of Motor Manufacturers and Traders. The data showed that more than 145,000 new cars were sold in June, down by almost a third from the previous month. Also, the total number of cars sold in the first half of the year were about 650,000, almost half of those sold in the first half of the year of 2019.

These numbers were largely expected since the UK government forced dealerships to close in April and May because of the pandemic. According to the Financial Times, these dealerships have been seeing little activity after the government lifted restrictions. At the same time, unlike in Germany and the US, the UK government has said that there are no plans for incentives to boost the sector.

EURGBP rises as Germany factory orders rise

The EUR to GBP pair also rose in reaction to the German factory orders numbers. The data showed that factory orders rose by more than 10.4% in May from April and dropped by more than 29.3% from the same month in 2019. The April factory orders were revised to a decline of 26.2%.

The rise in factory orders was mostly due to a 12.3% increase in domestic orders and a 8.8% increase in foreign orders. Manufacturers of capital goods saw a 20.3% increase while those who manufacture intermediate goods rose by 0.4%.

Analysts polled by Reuters were expecting the factory orders to jump by 15%. Later today, we will receive the UK construction PMI numbers and the eurozone’s retail sales numbers.

EUR to GBP technical analysis

On the daily chart, the EURGBP pair is above the 50-day and 100-day exponential moving averages. It is also slightly above the 61.8% Fibonacci retracement level, but is slightly below the important resistance at 0.9056. Also, the EUR to GBP pair is along the ascending trend line shown in black. This line connects the lowest level on April 30, June 9, and July 3. Therefore, the price will remain in an upward trend so long as it remains above this line.

On the other hand, a move below 0.9000 will invalidate the trend. This is an important psychological level and is also along the ascending trendline.

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