UK beats EU in the battle of PMIs; EUR/GBP takes a hit

Key Takeaways

Euro Area rebounds with strong PMIs
UK PMIs much stronger than expected; GBP goes bid
EUR/GBP has its biggest one-day selloff in over a month

The flash readings of the S&P Global PMIs released earlier showed that both the Euro Area and the UK are turning a corner in terms of business activity. The EA Manufacturing PMI dropped to 48.5 vs a January reading of 48.8 and an expectation of 49.3 In contrast, the UK Manufacturing PMI rose to 49.2 vs 47 in January and 47.5 expected. However, it was the services sector that was steering the ship for the data. The EA Services PMI was 52.3 vs a prior reading of 50.3 and an expectation of 51. The UK Services PMI was 53.3 vs a prior reading of 48.7 and an expectation of 49.2! The Services PMIs set the table for nice gains in the overall Composite data. The EA Composite PMI was 52.3 vs a January reading of 50.3 and an expectation of 50.6. But the UK Composite PMI jumped to 53 vs a January reading of 48.5 and an expectation of 49. As a result of the stronger UK data across the board, GBP went bid and therefore, EUR/GBP moved lower.

On September 26^th, 2022, EUR/GBP traded to its highest level since September 2020, near 0.9278 as former PM Liz Truss threw the markets into a frenzy with her budget plans. Order was restored over the next few days and by December 1^st, 2022, EUR/GBP had made a low of 0.8547. Since then, the pair has bounced to the 61.8% Fibonacci retracement level from the September 26^th, 2022 highs of the December 1^st, 2022 lows near 0.8999. However, since late December, EUR/GBP has only been trading between 0.8715 and 0.8979. With the strong move in GBP today, the pair is having its biggest one-day selloff since January 17^th, down -0.88% intraday. Notice that price today broke below the 50 Day Moving Average for the first time since December 15^th, 2022.

Source: Tradingview, Stone X

Trade EUR/GBP now: Login or Open a new account!

• Open an account in the UK
• Open an account in Australia
• Open an account in Singapore

On a 240-minute timeframe, if EUR/GBP continues to move lower, the first support is at the lows from December 20^th, 2022, at 0.8717. Below there, price can fall to the 200 Day Moving Average at 0.8652 (see daily), then the lows of December 1^st, 2022 at 0.8547. However, notice that the RSI on the 240-minute timeframe is in oversold territory. This indicates that the pair may be ready for a bounce. If EUR/GBP does bounce, first resistance is at the highs from February 17^th at 0.8929. The next resistance is a confluence of the highs from February 3^rd and the above mentioned 61.8% Fibonacci retracement level between 0.8979 and 0.8999. Above there, price can move to the highs from September 28^th, 2022, at 0.9066.

Source: Tradingview, Stone X

EUR/GBP sold off aggressively after the UK posted a stronger flash PMI than that of the Euro Area. The pair has been trading in a range for the last 2 months, however today posted its biggest selloff since January 17^th. Will it continue lower or does the oversold RSI on the 240-minute timeframe need to unwind and cause EUR/GBP to move higher?

Learn more about forex trading opportunities.

--- Written by Joe Perry, Senior Market Strategist

Follow me on Twitter at @JoeP_FOREXcom

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. CFD and Forex Trading are leveraged products and your capital is at risk. They may not be suitable for everyone. Please ensure you fully understand the risks involved by reading our full risk warning.

City Index is a trading name of StoneX Financial Ltd. Head and Registered Office: 1st Floor, Moor House, 120 London Wall, London, EC2Y 5ET. StoneX Financial Ltd is a company registered in England and Wales, number: 05616586. Authorised and regulated by the Financial Conduct Authority. FCA Register Number: 446717.

City Index is a trademark of StoneX Financial Ltd.

The information on this website is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement.