Forex Analysis – Trade of the Day: EUR/GBP 16th September 2014

United Kingdom – Consumer Price Index (CPI)

At GMT 8:30 a.m., the UK’s Office for National Statistics released the year-over-year Consumer Price Index (CPI) figure, which measures the changes in the price of products and services bought by consumers in the country.

Since the CPI comprise of mostly consumer goods, a higher CPI indicates rising consumer prices that account for the bulk of the overall national inflation. Analysts consider the CPI to be a leading indicator of the economy as higher inflation would motivate the central bank to increase interest rates in the future.

Last month, the UK’s Consumer Price Index (y/y) figure increased by 1.6%, and this month, the forecast was set at 1.5%. The actual figure came out same as the market expectation, at 1.5%.

Germany – ZEW Economic Sentiment

At GMT 9:00 a.m., the Zentrum fur Europaische Wirtschaftsforschung (ZEW) released its Economic Sentiment figure, that measures the level of a diffusion index based on a survey of 275 institutional investors and various analysts from Germany.

Since the institutional investors have to conduct their own private research and analysts have the most updated view regarding the German economy, their sentiments are considered to be a leading indicator of future economic health of the country. Since Germany is the most resourceful and productive economy in the Eurozone, this survey based economic sentiment index usually has an enormous impact on the Euro.

Last month, the German ZEW Economic Sentiment figure came out at 8.6, and this month, the forecast was set at a much lower level of optimism, at 5.2. However, the actual figure came above the market’s expectation, at 6.9.

Trade Recommendation for the EUR/GBP

EUR/GBP on 16th September
Since June 12, the EUR/GBP has traded sideways within a narrow range between 0.8035 and 0.7900. On September 10, the EUR/GBP formed a massive bearish outside bar (BEOB) that failed to push the price towards the lower end of the range. Instead, today, the EUR/GBP price has managed to break above yesterday’s high because of the better than expected German ZEW Economic Sentiment, which proved to be positive news for the Euro.

Regardless, this bullish move should be treated as a retracement of last week’s bearish price action. However, if the price continues to move upwards and closes above the resistance around the 0.8035 level, it would indicate a CALL in the EUR/GBP.

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About our Forex Analyst:  Asif Imtiaz

Asif worked as a prop trader for almost a decade, and later he managed trading operations for one of the largest foreign exchange strategy developers in Europe. Currently, he works as a trading consultant to several brokers and writes on various tech and financial topics. You can reach him at contact@asifimtiaz.com

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Asif Imtiaz

Asif worked as a prop trader for almost a decade, and later he managed trading operations for one of the largest foreign exchange strategy developers in Europe. Currently, he works as a trading consultant to several brokers and writes on various tech and financial topics. You can reach him at contact@asifimtiaz.com

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