There’s no stopping the unstoppable machine that is the UK recovery and sterling is getting lapped up. That was a very good read for retail sales but the only caveat is that retail figures can be very volatile. As I suggested in the pre figure post all it can take is something like schools finishing for summer or a bout of great weather (which doesn’t happen often) to boost sales and the ONS report confirms that.
The food sector in the report showed the biggest gain with a 2.1% increase from June and was the highest increase since April 2011. Supermarkets put increased sales down to the good weather as food, alcohol (shock), clothing and outdoor items were the big sellers.
I mused whether the breakdown in EUR/GBP on the 13th was just a stop run or something more substantial EUR/GBP knocks the tea and crumpets onto the floor and although the cross clawed it’s way back up to 0.8600 the move wasn’t looking strong and we crumbled again yesterday. Three days of good selling suggests a trend taking shape
EUR/GBP falling out of bed
The orders I mentioned earlier at 0.8525 are said to be quite strong and that’s what we are into at the moment. With GBP/USD remaining well bid it may only be a matter of time before these go. Under here we have the 200 wma at 0.8500, strong tech support and strong buying interest at 0.8480/85 and the July 2012 trend line at 0.8476.
EUR/GBP daily chart 15 August 2013
Despite my core short position I like the strength in both those levels for taking a separate long so will likely buy 50% of my position at 0.8500/05 and the rest at 0.8485/90, if we get there. I’ll likely place my stop around 0.8470 on a break of the trendline at 0.8476. I will probably unload some of my short position around here also.
Overnight we struggled at 0.8570 and there is good sell interest at 0.8580 which was the big break point on the 13th. The broken lower channel and 55 dma also come in at this level.
Everything else is moving bar EUR/USD and I’m keeping a close eye on that fact. It could be a lack of interest or it could be big money keeping the pair tight over the summer so that we have no volatile moves. As we enter September that may well change as the summer crowd start getting back to work. I’m still wary of the lack of movement over the GDP releases yesterday and when liquidity picks up I favour old teflon to go up rather than down.
Until then sterling is the focus and will provide some very good opportunities no doubt.
