Euro to Pound Sterling exchange rate rallies capped at 0.8450, EUR technically challenged across FX space

In early afternoon trade in London we see the euro to pound exchange rate is 0.14 pct lower on a day-to-day basis at 0.8419.

Stephen Gallo gives his take on the Euro and the potential for any rallies to fade:

"Leading into further US data later this week, we suspect that there will be room to fade rallies in the EUR against something – maybe one currency or maybe a host of currencies at once. Along these lines, we think there is money in EUR/AUD, EUR/NZD and EUR/CAD.

"Additionally, rallies in EUR/GBP should be capped below 0.84500 in the run-up to UK labour market data on Wednesday. The EUR should therefore remain a “sell on rallies” with the pair below the aforementioned level.

"We’d keep away from shorting EUR/USD aggressively until the next batch of US data is out of the way.

Gareth Berry at UBS also maintains a bearish approach to the Euro Pound exchange rate saying, "Having tested the strong support at 0.8397, the immediate risk appears for a short-term recovery to unwind the sharp sell-off. Resistance is at 0.8492. Support is at 0.8285."

FX Market Update

Better than expected data from China, combined with Japan’s successful bid for the 2020 Olympics helped to drive risk
appetite in the Asian and European sessions.

Leading into the NA session, the growth sensitive currencies of CAD, AUD and NZD are stronger, but immaterially so (up between 0.1 and 0.2%); while the European currencies of GBP and EUR are also up.

However, JPY, SEK and NOK are all weaker.

Euro technicals are bearish

We hear from Camilla sutton at Scotiabank who today says the Euro remains negatively placed on the currency markets:

"EURUSD short‐term technicals: bearish all signals suggest there is further EUR downside ahead and spot has yet to break above Thursday’s high of 1.3223, suggesting momentum is stalling. Support lies at Friday’s low of 1.3105. We favour short positions."

This view chimes with that held by Berry who says; "strong support is at 1.3103, a break below this would extend the weakness to 1.3021. Resistance is at 1.3223."