Britannia Rules the Nay’s

The end of the month is turning into a tough one for GBP naysayers as cable sales higher. Meanwhile, Draghi drags Euro lower, and Trump threatens to terminate, again. 

Month end flows should always be taken with a grain of salt, as institutions rebalance international portfolios or do last minute hedging etc. These execute at best once a month flows may or may not fit in with the general theme of the week or month, especially ahead of an almost global long weekend.We can also expect to see a lot of large options expiries and that dirtiest of words, “fixings”, throughout the London and New York sessions.

Month end noise aside and somewhat belying the timid ranges we have seen in the G-10 universe over the last 12 hours quite a lot is actually going on. Setting the scene nicely for a rather more frisky FX market next week with the FOMC and Non-Farms on Friday.

GBP continued to rule the waves, moving higher against the USD and the EUR. We will look at this in a bit more detail later but needless to say, it still feels as if some structural shorts are yet to be unwound.

President Trump set a few cats among the pigeons this morning by threatening to either renegotiate or terminate South Korea’s trade deal with the U.S. and in a Mexico moment, handing the South Korean armed forces a $1 billion bill for the installation of their THAAD system around Seoul.

The two interesting things that came out of this were that a. Neither the Kospi nor the Korean Won reacted at all to the statement, suggesting that the President’s modus operandi with regards to negotiations is starting to fall on deaf ears globally. The carrot and the stick approach is refreshing, it is just not very subtle.

Secondly, in an equally Mexican response, the South Korean Defence Ministry said they had absolutely no intention of paying for it and the greenback started weakening.


Starting with the ECB overnight, Mr Draghi has most certainly caused a drag on Euro with some decidedly dovish comments overnight.

“We have not yet seen sufficient evidence to materially alter our assessment of the inflation outlook — which remains conditional on a very substantial degree of monetary accommodation.” 

“Interest rates will “remain at present or lower levels for an extended period of time, and well past the horizon” of asset purchases.”

source: Bloomberg

This saw EUR/USD drift lower by over nearly a 100 points in yesterday’s session although Mr Trumps terminating comments have seen the single currency make some ground back. The Euro is delicately poised on the charts as we head into the long weekend, sitting midrange at 1.0895.

As highlighted by the yellow circle, the EUR has formed a double top at 1.0950 and has made a series of lower highs since the start of the week. This becomes the closest major resistance.

Support is denoted by a clear double bottom at 1.0850 with the 200-day moving average (DMA) just below there at 1.0841. A close below here could set the EUR up for a correction to fill its Monday gap to 1.0730 early next week. Longer term trendline support and the 100-DMA lie below in the 1.0640/50 area.





Her Majesty’s British Pound has enjoyed an excellent week. Consolidating its gains post the snap election announcement and on the charts looking like it may be getting ready to move higher. U.K GDP has just come out.

16:30 *(UK) Q1 ADVANCE GDP Q/Q: 0.3% V 0.4%E; Y/Y: 2.1% V 2.2%E – Source
Interestingly the slight miss has had a zero effect on the GBP, in contrast to the effects a miss on any data from the U.K. would have had a few weeks ago. Polls are showing the Tories will win over 50% of the vote if the election were to happen today must be having some effect. However, I suspect this has more to do with the amount of structural longer term shorts that are out there in GBP generally and I suspect the break though 1.2800 made some palms sweaty. A break of 1.3000 could see an all out anxiety attack amongst GBP bears.
The chart below shows the GBP  bullish consolidation in stark detail. Looking at the technicals, GBP has broken through resistance at 1.2917 with the next resistance at 1.30000 more psychological than scientific. A daily close above this level could imply a larger move to the 1.3400 area.
Support is initially at 1.2917 followed by 1.2750 and the 1.2600 area. A series of previous daily highs and the 200-DMA.


In the big picture, EUR/GBP is still in its broad post-Brexit consolidation range of 8300/8850. More importantly, the GBP rally has seen the Monday morning election gap filled on the charts. However, it is important to note the gap has been filled by the GBP rallying, not the EUR dropping. With this gap out of the way, we can ponder the EUR/GBP chart from a more unbiased perspective.
We are trading nearer to the lower end of the longer term range, but it is not yet clear that we will move through the bottom. A break in GBP/USD above 1.3000 and a drop in EUR/USD to 1.0730 could change that dynamic.
In the meantime, EUR/GBP has resistance at 8530 followed by the 100 and  200 DMA’s at 8550 and 8595. Support is nearer, at 8410 with the key level of 8300 behind that.
                                                                                              EUR/GBP Daily
We appear to be at some interesting inflexion points with EUR and GBP as the month draws to an end. From a macro perspective, it appears that Sterling’s Brexit day of reckoning will not be coming as soon as many longer term structural bears would want. From a technical perspective, GBP is looking constructive against both the USD and EUR. The Euro itself meanwhile, is looking decidedly less so against the greenback, with the charts implying the single currency may not mind the gap, it may fill the gap.

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Jeffrey Halley

Jeffrey Halley

Senior Market Analyst, Asia Pacific, from 2016 to August 2022
With more than 30 years of FX experience – from spot/margin trading and NDFs through to currency options and futures – Jeffrey Halley was OANDA’s Senior Market Analyst for Asia Pacific, responsible for providing timely and relevant macro analysis covering a wide range of asset classes. He has previously worked with leading institutions such as Saxo Capital Markets, DynexCorp Currency Portfolio Management, IG, IFX, Fimat Internationale Banque, HSBC and Barclays. A highly sought-after analyst, Jeffrey has appeared on a wide range of global news channels including Bloomberg, BBC, Reuters, CNBC, MSN, Sky TV and Channel News Asia as well as in leading print publications such as The New York Times and The Wall Street Journal, among others. He was born in New Zealand and holds an MBA from the Cass Business School.
Jeffrey Halley
Jeffrey Halley

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