A milestone too far for the shared currency

Modified: Wednesday, 28 August 2013 15:39 BST
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Shaun Osborne at Scotiabank tells us that, from a technical perspective, the euro has run into a brick wall in its efforts to eat value out of the British pound:

"Just after we conceded defeat on EUR/GBP holding resistance in the 0.86 area, the rally in the cross stumbled badly. The drop from the mid-week high formed a bearish key reversal day (and a marginal weekly bearish engulfing line).

"The weight of technical evidence strongly suggests that a major top has formed in EUR/GBP here. Losses stalled right on the 0.86 line though, so further, sharp losses are not guaranteed from this point. A move back below the figure area—a gap from the March slide and effectively the top of the range in the past three months—would suggest scope for more drift back to the 0.85 area though."

However, those hoping for an extended rally by the GBP should be cautious of occurrences in the larger euro / dollar exchange rate which tends to dictate direction to the smaller euro to pound exchange rate.

"Euro is trying to start forming a new ascending structure; the previous one has been already completed. We think, today the price may start a correction to return to the level of 1.2990 and then form a new ascending structure," say RoboForex in their most recent analysis of the shared currency.

Also issuing a warning against those hoping for unfettered EUR-GBP gains is to Luc Luyet at MIG Bank who says the euro pound exchange rate will be afforded ample support ahead:

"EUR/GBP declines last Wednesday, validating a daily engulfing bearish formation. However, as long as the support at 0.8575 (10/07/2013 low) holds, a move towards the resistance at 0.8794 is still favoured. Another support lies at 0.8470 (12/06/2013 low)."

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