The UK economy weakened in Q4 of 2020, as did certain economies of the globe, but the weakness was lighter than in the Eurozone and it will last less than in the Eurozone it seems. The Eurozone economy fell into contraction again in Q4 of last year, declining by 0.7% and it seems like Q1 of this year will be negative again, which means a technical recession. In the UK, the economy stayed afloat in Q4 of last year, expanding by 1.0%.

Services are coming out of recession in the UK, after the PMI indicators climbed to 49.5 points in February, while construction is already in expansion. In Europe services  don’t seem to be coming out of the recession, as restrictions and lock-downs continue in different member states.

Inflation improved in December in the Eurozone, but headline CPI (consumer price index) remains below 1%, while in the UK is is approaching 2%. So, the economic fundamentals are more positive for the GBP, which has held better then the Euro during the USD climb in the last couple of week.

EUR/GBP has been trading on a bearish trend since the beginning of this year, as the GBP gained some momentum after the EU-UK trade deal at the end of 2020. During this time, moving averages have been doing a great job providing resistance during retraces higher and pushing the price lower.

We have also opened quite a few sell forex signals in this pair since early January, when we have spotted a good opportunity. These opportunities have appeared at moving averages on the H4 chart, particularly the 50 SMA (yellow) on the H4 chart.

The price has fallen to 0.8540-50, where it has formed a support zone and today we saw another retrace higher during the European session. But, that retrace seems to be over now at the 50 SMA once again. Buyers are giving up at this moving average, which is acting as support. We decided to take this chance and open another sell signal at this moving average. Now let’s wait for the reversal to come.