Euro sterling rate outlook: EUR/GBP crumbles before re-entering September's comfort zone
At 13:45 in London we see the euro to sterling exchange rate trading half a percent lower at 0.8408.
As the above graph shows, where we close today's trading session will be important for the near-term outlook. We doubt the rate will be able to break back into the congestion zone between 0.8500 and 0.8460 that saw much of September's trade. If this is the case then we would expect the currency to spend coming days in the region between current levels and support at 0.8340.
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Sean Lee at FXWW says he sees the euro to sterling exchange rate sticking in a broader range going forward:
"EUR/GBP is near the bottom of a downward sloping channel; the trend is bearish and I still expect to see prices below .80 early next year but this pair doesn’t move fast so patience is required.
"I’d suggest that .83/.85 will contain for the next few weeks and as we know, this pair will edge higher as CB buying kicks in towards the end of the month."
Sterling is main focus of European trading session
The British pound has drawn much of today's market focus courtesy of positive employment data and central bank guidance.
"GBP was the main focus in Europe as better than expected jobs data lifted Cable onto the 1.59 handle and saw EUR/GBP well off the .8463 high to test .8420 before the Inflation report," says a note from the team at FX Market Alerts.
The latter gave GBP another boost as the BoE ascribed a 41% chance of unemployment hitting target by the end of 2014, though Cable has topped out at 1.60 as Carney emphasises that it will be a start of the discussion on tightening, not a trigger.
Pound dollar exchange rate gains questioned
Unlike the GBP/EUR, and despite the pro-GBP stance on markets today, the outlook for the GBP/USD remains challenging.
"Cable is facing a possible reversal in the medium to long-term. In fact the uptrend in GBP/USD has been losing steam in recent weeks, with a double top formation seen recently on the daily chart, together with lower highs recorded on technical oscillators," says a note from RealTimeForex.com.
Analysts say they are now noticing a descending triangle formation at the top of the trend on the weekly chart, signalling a reversal.
Furthermore, MACD is heavily overbought and about to cross the signal line lower.
"A weekly close below 1.5850 is needed to confirm a bearish reversal. This development will pave the way for accelerated weakness in the pair to possibly head down to 1.54:55 levels. Inversely, a break and close higher than 1.6150 would negate this outlook and give scope for a continuation in the bullish trend," say RealTimeForex.