FxWirePro: Sell euro against pound heading to ECB

The pound is likely to outperform the euro,

• The euro is continuing its struggle against the USD as concerns mount over the health of the European economy.
• This month’s data has confirmed once again that the slowdown in Eurozone is very real.
• Spanish manufacturing PMI declined to contraction territory; it was 49.9
• Italian manufacturing PMI declined further into contraction territory; it was 47.7
• German manufacturing PMI was even worse at 47.6. Employment in the month of February declined by 21,000, the worst number since September 2018.
• At today’s meeting, we expect the European Central Bank (ECB) to use dovish remarks to talks down the euro.

On the other hand, the pound is holding up well,

• Price actions over the past two days, suggest that the pound could reverse the recent correction and move higher against the USD.
• The chart clearly shows that GBP/USD has formed a hammer candle yesterday, which was followed by a ‘Dragon-fly’ Doji candle; both are important signs of bullish sentiment.
• In addition to that, probabilities are higher that despite the ongoing gridlock in negotiations between the European Union and the United Kingdom, many a good news might hit the market- such as amendments like avoiding a no-deal Brexit, taking account of public opinion via the second referendum, and an extension of the Brexit deadline as 29th March approaches.

The retail sentiment remains in favor of the trade,

• Retail sentiment for the pound has dropped to the neutral zone. Retail traders have reduced their long positions in the pound against the USD, and now retail positions are equally divided among long and short. Net retail positions could now easily shift to the short side, which would give the pair a bullish bias. Retail numbers are based on data from IG markets, a UK-based company providing trading in financial derivatives such as contracts for difference and financial spread betting.

• On the other hand, 59 percent of retail positions remain long on the euro, giving it a bearish bias, especially as retail traders have increased their long positions since last week.

The euro is currently trading at 0.859 against the USD.