June 7, 2021 13:58:18

While there is some concern over a possible postponement of the UK’s scheduled June 21 full reopening day, the market doesn’t appear to be that fussed with sterling pretty flat versus the euro today. Politicians are giving themselves as much time as possible to make a decision whereas economists reckon the economic impact won’t be significant if it is delayed a few weeks.

More important going forward may be central bank divergence with the BoE happy to see the UK recovery picking up, with the first interest rate rise possibly as early as the second half of next year. In contrast, the ECB is widely expected to play down even any trimming of their emergency QE program this week, copying the “go-slow” gear of the Fed.

EUR/GBP has been in a long-term downtrend since December of last year when it topped out at 0.9230. Prices then fell in a bear channel printing a cycle low at 0.8472 before bouncing to just above 0.87. Over the last eight weeks, we’ve been trapped in a range trading around the 50-day SMA and a Fib level from the high/low over the last six months. Prices over the last week or so have been capped by the downward trendline from the late December high. Support again sits at the bottom of the recent range around 0.8560/65, so can the long-term bearish momentum prevail and break the botom of this range? If so, prices will head quickly to the cycle low at 0.8472.