Pound at Risk of Fall Towards 1.2195 Against the Euro Warns Lloyds’ Robin Wilkins

The pound to euro exchange rate needs to extricate itself out of its current quagmire if it is to avoid significant falls lower.

The longer sterling remains unable to extricate itself from where it currently finds itself against the euro, the stronger the downside bias is likely to become.

The pair remains trapped in a range between 1.3072 and 1.2618:

“The longer this range plays out the more likely it becomes that we still see a move towards key long-term channel and Fibonacci support in the 1.25-1.2195 region,” warns Robin Wilkins at Lloyds Bank.

According to Wilkins, at this stage a rise through 1.3071 is needed to suggest further near-term strength to test more important resistance in the 1.3245-1.3423 zone.

Sideways Action to Continue say Soc Gen

Advocating for ‘more of the same’ is Stéphanie Aymes at Societe Generale who notes the significance in the pullback in GBP/EUR after testing key resistance at 1.4285/1.4706.

Aymes says the ongoing decline “looks similar to previous ones in terms of timing ratios and is about to complete a typical span of seven months to a year.”

If Aymes is right, the technicals could chime with the fundamental forecasts held by the world's leading institutions that suggest the worst of the downside in sterling-euro has now passed.

A vanquishing of resistance at 1.33/1.3422 will decide whether a stronger advance is able to shape up.

Markets: Bank of Japan Leave Rates and QE Unchanged, Less Dovish Communique

Turning to the markets, the BoJ left their QQE package and rates unchanged overnight, but shifted to being less dovish.

It would appear that the Bank feels it is close to exhausting the options at its disposal to stimulate the soft economy.

This has seen USDJPY drift lower from the top of the current 114 to 111 range, while the broader USD has found strength as the markets focus shifts towards the FOMC meeting and policy announcement tomorrow.

Attention today will be on the February retail sales report.

The backdrop for US consumers remains favourable, supported by a strong labour market and buoyant consumer confidence which is expected to be reflected in a second consecutively monthly rise in ‘core’ retail sales (excluding food, autos and building
materials).

Lloyds Bank forecast a rise of 0.1% m/m following January’s solid 0.6% increase, while overall retail sales are expected to be up 0.1% in February despite lower gasoline prices.

The Empire manufacturing survey will provide an update on US industrial sector.

The headline index has been in negative territory since last August highlighting the difficulties facing the sector.

Another negative reading is expected for March. However, some improvement is expected to -12.0 from -16.6 suggesting that sentiment is improving, albeit slowly.

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