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The U.K. retail sales report is slated to show a double-digit drop in consumer spending, so I’m looking at this short sterling play.

Asian session traders were in no mood to take on more risk either, which could be bullish for the lower-yielding euro.

Here’s how the majors fared and a quick rundown of the big headlines in the last few of hours:

Currency Snapshot

Major Forex Pairs Price Performance from MarketMilk
Major Forex Pairs Price Performance from MarketMilk

Fresh Market Headlines & Economic Data:

Upcoming Potential Catalysts on the Economic Calendar:

  • U.K. retail sales and public sector net borrowing at 7:00 am GMT
  • ECB monetary policy meeting accounts at 12:30 pm GMT

What to Watch: EUR/GBP

EUR/GBP 1-hour Forex Chart
EUR/GBP 1-hour Forex Chart

EUR/GBP is cruising higher as its lows since the middle of the month can be connected by an ascending trend line.

The pair is currently testing this support level and might be waiting for the next set of major catalysts in order to decide on a bounce or a break.

The U.K. is set to print its April retail sales report and might show a 15.8% slump in consumer spending, worse than the earlier 5.1% decline. The public sector net borrowing report is also coming up.

Stronger than expected results could lead to a break below the area of interest at the trend line, 50% Fib, .8950 minor psychological mark, and former resistance level. If that happens, this pair might be in for a reversal from its climb.

Meanwhile, the ECB monetary policy meeting accounts a.k.a. the transcript of the central bank’s latest huddle could also bring some volatility for the shared currency.

Even though ECB policymakers agreed to sit on their hands back then, the minutes of the central bank meeting could contain some clues on what other stimulus measures they might have up their sleeve.

Optimistic remarks and sustained risk aversion from the earlier trading session could be enough to boost EUR/GBP back up to the swing high at .9000.

Both scenarios seem likely at this point, and a quick look at EUR/GBP volatility shows the pair easily moving by 70 pips in either direction.