EURGBP has been trending lower on its 4-hour forex chart, with price moving below a descending trend line connecting the highs since May. Price looks ready to pull back to the trend line, which is in line with the 200 SMA. For now, the 100 SMA is below this longer-term moving average, confirming that the downtrend is likely to continue.
In addition, the trend line lines up with the 61.8% Fibonacci retracement level and the .7100 major psychological mark. If this holds as resistance, EURGBP could make its way back down to the previous lows around the .6930 level.
Stochastic has already reached the overbought area, indicating that buying pressure is fading and that sellers are ready to take over. RSI is still moving up, suggesting that there is still a bit of buying momentum left before the correction is completed.
Event risks for this trade include the release of PMI readings from Germany and France today. Germany is expected to show a stronger expansion in its manufacturing sector since the index is set to climb from 51.9 to 52.9 while its services PMI could climb from 53.8 to 54.1. In France, the manufacturing PMI is expected to rise from 50.7 to 51.1 while the services PMI could fall from 54.1 to 53.9.
Later on, the UK will release its BBA mortgage approvals report and possibly show an increase from 42.5K to 43.5K, reflecting a pickup in housing demand and potentially stronger spending later on. However, the UK retail sales report released yesterday showed a weaker than expected 0.2% uptick versus the projected 0.4% increase.
Next week, the UK is set to print a bunch of medium-tier reports earlier on, along with the much-anticipated preliminary GDP reading for the second quarter of the year. Strong data could remind traders that the BOE is shifting to a more hawkish stance these days.