EUR/USD and GBP/USD slip on inflation woes while EUR/GBP range trades

EUR/USD slips as US dollar rises on surging global bond yields

EUR/USD trades lower, back below the $0.98 mark, as the US dollar benefits from flight to quality flows following surging global yields as inflation continues to rise unabated.

EUR/USD’ sell-off Tuesday’s $0.9875 high has briefly taken the cross below the 11 October high at $0.9774 to Wednesday’s low at $0.9758, before recovering on Thursday morning’s September German Producer Price Index (PPI) better-than-expected data release. Month-on-month (MoM) September PPI came in lower-than-expected at 2.3% versus an expected 7.9%.

A slip through $0.9758 would eye the two-month support line at $0.9674, below which lies the mid-October low at $0.9632. Minor resistance sits at the $0.9854 to $0.9865 early-September low and late-September high. Only a rise above $0.9875 could lead to the $0.9901 August low and also the $0.9943 to $0.9962 area being back on the cards. It consists of the mid-September low, 55-day simple moving average (SMA) and June-to-October downtrend line.

EUR/GBP range trades in low volatility amid UK 40-year high inflation

EUR/GBP on Wednesday broke through its two-month downtrend line at £0.8658 as UK inflation came in above expectations at 10.1% in September, matching its 40-year high from July, with upward pressure from food and energy.

Since then, the cross has traded in a very tight range below Tuesday’s high at £0.8731. A rise above this level would put the £0.8787 mid-September high on the map. If bettered, the 26 and 28 September lows at £0.8853 would be eyed next.

Minor support below the breached downtrend line, Wednesday’s low and the 55-day SMA at £0.8658 to £0.8634 comes in at the mid-September low at £0.8626 with further support being seen at the early September trough at £0.8567.

GBP/USD probes uptrend line on UK government chaos

GBP/USD slid back from its $1.138 mid-October high to its September-to-October uptrend line at $1.1218 among the UK government’s ongoing chaos and 40-year high inflation. Following last week’s sacking and replacement of the Chancellor of the Exchequer, yesterday the Home Secretary resigned for breaching the ministerial code but did so by launching a stinging attack on the prime minister who has overseen several major U-turns in her government’s policy since taking office a month ago.

On Wednesday UK inflation came in above expectations at 10.1% in September, matching its 40-year high from July, with upward pressure from food and energy. This accentuated the slide in the pound sterling which weighs on the cross’ uptrend line.

A fall through Wednesday’s low at $1.1186 may lead to the minor psychological $1.10 mark being revisited. Below it last week’s low at $1.0924 can be found. If also fallen through, the 27 September high at $1.0838 would be targeted. Resistance remains to be seen along the August-to-October downtrend line at $1.1388 and at this week’s high at $1.1439 as well as at the early October peak at $1.1495.