Raised above the long-term range and ready for new gains

© Savo Ilic, Adobe Stock

– GBP / EUR above 1.1600 long-term range limits

– As long as the market holds 1.16, the bias remains on the rise

– Brexit uncertainty to dominate the pound sterling; the inflation of the euro

The price of the pound to the euro is expected to start trading at 1.1617 on Sunday after falling by about 0.5% the previous week, although the pair remains above its level. Long-term range ceiling and studies charts suggest that gains should not decline this week excluded.

Sterling fell last week in a climate of heightened uncertainty regarding the Brexit, after prime minister Theresa May failed in her third attempt to get the EU's withdrawal agreement approved for the House of Commons.

There is now a risk that the UK will leave the EU without an agreement on April 12, which would be negative for the pound sterling. But it is also possible that another referendum on Brexit or general elections will be called in the coming weeks, which could be positive for the pound sterling if the markets saw it offer the opportunity to abandon the UK exit from the EU.

From a technical point of view, the outlook for the GBP / EUR is slightly bullish, as the pair remains above the key level of 1.1600, which is its long-term range cap. If the market eventually returns below this level at a decisive level, it would be a bearish signal, but as long as this level can be maintained, it is possible to make further gains over the next few years. next days.

Above: Euro-pound rate indicated weekly.

Another bullish factor is the Japanese hammer-shaped candlestick that formed a week ago (circled below). This normally indicates short-term gains, although the lack of follow-up in the coming weeks suggests that this signal may not be very strong.

Overall, a break above the high of 1.1801 2019 would likely give the go-ahead to a continuation of the upside to a target of 1.1960.

Above: Pound / Euro rate. Japanese Hammer candlestick pattern.

The daily chart also shows how the pair has returned to the top of the range over the long term, stopped and then reversed higher. This is another suggestion of a bullish bias.

Sterling has been moving sideways since the middle of February in a smaller range that looks a lot like a consolidation scheme. Since the previous trend was up, a break-up is slightly more likely than a decline.

Momentum, measured by the Relative Strength Index (RSI), is falling. This could be a sign that the pair is about to weaken further, but it is a secondary signal that is not enough yet to change the outlook.

Above: Euro-pound rate indicated daily.

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The book: what to watch

The main event of the week ahead for Pound Sterling will be the opening of a new chapter of the Brexit saga, with markets now focused on April 12, the deadline for the formal withdrawal of the UK withdrawal.

Prime Minister Theresa May now has the choice between pursuing a so-called Brexit without agreement and asking the EU for a further extension of the Article 50 negotiating niche that will almost certainly require participation in the negotiations. elections to the EU Parliament.

There is still no way forward that can command a majority in the House of Commons, although MPs who tried to take control of the Brexit process by the government will have another chance on Monday to force it to pursue a future model relationship they find more acceptable.

Among the ideas put forward by parliamentarians include a "permanent customs union", the revocation of Article 50 and another referendum, among others. All of these options should face stiff resistance from the minority of Brexit supporters in Parliament, while also being controversial at the electoral level.

It is also possible that Theresa May is trying to arrange a fourth vote on her withdrawal agreement, although it remains to be seen whether she can win it or not.

In addition to the Brexit drama, the March IHS Markit PMI polls will also be released, even if they will have little impact on Sterling, given the Brexit's unfailing market focus.

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The euro: what to watch

The main publication of the euro in the coming week concerns the data on inflation, which will come out at 10 am on Monday. The consensus is for inflation of 1.5% in March, unchanged from February. Underlying inflation, which excludes volatile components of fuels, food and tobacco, is expected to rise from 1.0% to 0.9% in February.

Inflation is important for the euro because it informs the central bank's policy on interest rates and this influences the currency.

Mario Draghi, president of the European Central Bank, said in a speech last week that he expects the ECB to keep its rates low for some time because inflation is already too low and that the economy is slowing down. As inflation is demand driven, price pressures tend to weaken as the economy slows.

The release of the minutes of the March ECB Policy Meeting at 12:30 GMT on Thursday will be another key moment in the coming week. This will reveal the deliberations of the Board of Governors at the last meeting and may be useful for gauging what they might do next. The risk is that the growth problems become so severe that they are guiding the policy of increasing locals and completely cancel the increase in interest rates for the moment.

The unemployment rate was one of the positive points in the euro area data and is expected to show an increase of 7.8% over the previous week, as was the previous result. There is a risk that it could be better than expected that would support the euro.

Retail sales data for February is published on Wednesday and is expected to rise 0.2% from 1.3% previously on a monthly basis and 2.0% from an increase of 2.2% on an annual basis. . Retail sales contribute significantly to overall GDP. Therefore, if the data are better than expected, they could support the euro and vice versa, if it were worse.

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