EUR/GBP Price Outlook - Multi-Week Trading Range Coming Under Pressure

• EUR/GBP looking to re-test multi-week range support.

• IG client sentiment is mixed

Sterling continues to hold a small bid despite fears that the UK re-opening on June 21 may be pushed back due to covid-19 variant concerns. The FX market, in general, is subdued ahead of tomorrows US jobs report, and more broadly as traders find volatility in other markets. While breakout markets are more enticing for short-term, volatility-biased traders, trading ranges can also attractive trading opportunities with less risk involved. EUR/GBP is one of these ranging markets, stuck in a 1.6 point range over the last two months, and has offered repeated trading opportunities. Range traders should be aware however that the lower bound of the range is now coming under pressure, although support has so far held repeated breakthrough attempts.

The daily chart shows that a 0.8560 – 0.8720 range has held for the last two months with resistance holding firm despite a handful of attempts to break higher. The general trend in the last month shows the pair trading in the lower half of the range and this suggests another attempt at support is likely. The three simple moving averages also suggest that EUR/GBP may move further lower, especially as the 50-dsma is now capping any short-term upside. A confirmed break of support will leave 0.8500 vulnerable.

IG Retail trader data show 57.73% of traders are net-long with the ratio of traders long to short at 1.37 to 1.The number of traders net-long is 5.49% higher than yesterday and 10.18% lower from last week, while the number of traders net-short is 9.22% lower than yesterday and unchanged from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests EUR/GBP prices may continue to fall. Positioning is more net-long than yesterday but less net-long from last week. The combination of current sentiment and recent changes gives us a further mixed EUR/GBP trading bias.

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