Outlook on EUR/USD, EUR/GBP and GBP/USD as Eurozone hints at stagflation
Outlook on EUR/USD, EUR/GBP and GBP/USD as slowing growth and sticky inflation in the Eurozone hint at stagflation.
EUR/USD tries to regain its 200-day simple moving average
EUR/USD’s slide is trying to stabilise above its August $1.0766 low and regain its 200-day simple moving average (SMA) at $1.082 as a cooling US labour market points towards a possible end to the Federal Reserve's (Fed’s) tightening cycle and weighs on the US dollar.
If the moving average were to give way, the July low at $1.0834 would be next in line ahead of the 24 August high at $1.0876.
Were the August trough at $1.0766 to be slipped through, the May low at $1.0636 would represent the next lower significant downside target.
EUR/GBP trades in low volatility
EUR/GBP’s recovery from its one-year August low at £0.8493 took it to £0.861 before the cross headed back down again as stagflation emerges in the Eurozone. Growth is slowing while inflation remains sticky, pushing the euro down as further rate hikes in such an environment look less likely than before.
The late-July low at £0.8545 may be revisited on Monday but is likely to offer at least interim support. While this is the case, a rise back towards the 55-day SMA at £0.8585 may ensue.
Below £0.8545 sits key support between the £0.8522 to £0.8504 June and July lows.
GBP/USD find support above $1.2549 August low
GBP/USD’s descent has so far taken it to last week’s $1.2549 August low above which the cross is trying to stabilise as the US dollar retreats amid a cooling US labour market and lower odds of another rate hike being seen in this cycle.
Provided the $1.2549 level underpins, the July-to-September downtrend line at $1.2709 remains in sight.
While next higher resistance at $1.2819 isn’t bettered, however, the medium-term trend remains bearish.
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