Two trades to watch: EUR/GBP, Dow Jones

EUR/GBP rises despite encouraging UK labour market data. Dow Jones eases from all time highs ahead of US retail sales & Powell.

Charts (3)

EUR/GBP rises despite encouraging UK labour report 

EUR/GBP is edging higher despite upbeat UK labour market data and ahead of Eurozone Q2 GDP data. 

UK saw 95k new jobs added in May, well ahead of the 75k forecast and 25k in April 

Unemployment ticked lower to 4.7% in the three months to June down from 4.8% 

Wage growth rises to 8.8% YoY vs 8.5% forecast 

Eurozone Q2 GDP also due – this is the second estimate so not expected to be as market moving as the first unless there is a significant difference. 2% QoQ growth expected. 

Guide to the Pound

Where next for EUR/GBP? 

The pair has trended lower across the year, its has been trading in a descending channel since late April and trades below 50 & 100 dma is established bearish trend.  

The pair bounced off the fresh 18-month low of 1.8450 hit last week and has retaken 0.85. The bullish crossover on the MACD supports further upside. 

 Buyers will need to overcome resistance at 0.8560, the confluence of the 50 dma, the upper band of the descending channel and the August high, which could prove a tough nut to crack. A break-through this level could see 0.8590 the 100 dma tested with a move above here negating the near term downtrend, bringing 0.8670 the July high into sight. 

On the down side 0.8470  the April low could offer some support ahead of 0.8450 the 18 month low and the lower band of the descending channel. Beyond here 0.8390 a level last seen in January 2020 could come into play. 

 

Dow Jones eases back from all time high ahead of US retail sales, Powell 

Risk off is dominating the markets on Tuesday amid rising covid cases in China and tighter lockdown restrictions. The unfolding geopolitical situation in Afghanistan is adding to the down beat mood. 

US retail sales data is in focus, expectations are for a -0.2% MoM decline after an unexpected rise in June to 0.6%.  

Data on Friday revealed that US consumer confidence was at the lowest level for almost a decade. Weaker consumer morale often means that consumers rein in spending. Will we see this in the retail sales data? 

Fed Chair Powell is also du to speak. Any clues that the Fed is laying the groundwork towards tightening monetary policy could fuel the rotation into cyclicals.

Home Depot is due to report.

A guide to the Dow Jones

Where next for the Dow Jones? 

The Dow Jones has been trending firmly higher after rebounding of the July low of 33737, hitting a fresh all time high of 35630 in the previous session.  

The index trades above its multi-week ascending trendline and above its 50 & 100 sma on the 4 hour chart in an established bullish trend.  

The RSI remains in bullish territory. However, it points lower giving mixed signals.  

Any meaning full move southwards would need to over the ascending trendline support at 35430 followed by the 50 sma at 35285 and the 100 sma 35140, this has proved to be a strong support in the past and a move below here would negate the near term up trend. It would take a move below 34750 for the sellers to gain traction. 

Any move higher would need to push above 35640 to reach fresh all time highs. 

How to trade with City Index

Follow these easy steps to start trading with City Index today:

  1. Open a City Index account, or log-in if you’re already a customer.
  2. Search for the market you want to trade in our award-winning platform.
  3. Choose your position and size, and your stop and limit levels
  4. Place the trade.



More from Trade Ideas

Disclaimer

This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

StoneX Financial Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit cityindex.com.sg for the complete Risk Disclosure Statement.