Two Trades To Watch: EUR/GBP, FTSE - Thursday, Mar. 18

EUR/GBP to break lower post BoE? Can FTSE finally break above 6800/10?

Brexit 8

EUR/GBP with BoE in focus

EUR/GBP trades just above multi- month lows ahead of the BoE rate announcement (FXE, FXB).

No change in policy is expected. BoE Governor Andrew Bailey will need to walk a tightrope between sounding optimistic regarding the outlook for the UK economy without sending inflation expectations surging higher.

The ECB last week announced that they will front load the bond buying program. BoE unlikely to follow suit. The central bank divergence could send the pair lower.
Christine Lagarde is also speak later today.

Where next for EUR/GBP?

After falling steeply since the start of the year, EUR/GBP is consolidating those losses waiting for the next catalyst – the BoE.

The pair has traded in a tight range of 0.8550 – 0.86 in recent sessions ahead of the central bank’s rate announcement.

A more hawkish than expected BoE could see the price break through support at 0.8550 and head towards support at 0.8520 and then on to 0.8430 before eventually targeting 0.8280 the 2020 low.

A more dovish sounding BoE could see the 0.8550 support hold. The price is already testing the descending trendline dating back to mid December. Any recovery would need to break above 0.8600 20 sma  before targeting 0.87 resistance from February 25.

Can the FTSE finally break 6800/10?

The Fed kept rates unchanged and the dot plot was more dovish than expected with no rate rises expected through the end of 2024.

S&P500 & Dow Jones surged to record high, with the upbeat mood transferring over to Europe.

All eyes to BoE, a stronger Pound could limit FTSE gains

Where next for the FTSE?

The FTSE  has been trending higher since later February. It trades above its 50 sma on the 4 hour chart and above its 3 week ascending trendline.

However, the rally is losing momentum and the index has failed on several attempts to break through strong resistance at 6800/10. 

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