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- GBP/EUR pulls back to key trendline
- Vulnerable to break lower and change of trend
- Upside capped by resistance from 200-day MA
Pound Sterling has pulled back to an important chart level against the Euro, where the short-term uptrend is at risk of breaking down.
The GBP/EUR exchange rate, which is currently trading at 1.1248, has corrected back to a key trendline for the move up since the August lows.
Yesterday the exchange rate bounced after touching the trendline, but the move soon ran out of steam and the Pound retraced the gains. There is now a risk it might pierce below it, in time, ushering in a more bearish scenario for the pair.
A break below a confirmation level at 1.1189 would probably open the way for a move down to a target at 1.1080 at the level of the 50-day moving average (MA).
Large MAs often act as barriers to trending prices, hence why see it as an obvious target to any sell-off.
Such a move might also change the short-term trend from bullish to bearish.
Those readers looking to lock in current exchange rates for the purposes of international payments can achieve a rate of around 1.1180 with FCA-regulated independent currency specialists, while high-street bank accounts will typically be offering in the region of 1.0950-1.1050.
The outlook for Sterling is however difficult to call in the current febrile political atmosphere, and any positive developments that suggest Prime Minister Johnson's latest Brexit plans have a shot of success - as we highlighted yesterday - might see the pair continue rising within its bullish trend channel.
If this is the case, then a break above the 1.1300 level might provide the exchange rate with a bullish boost and confirmation for more upside, to a potential target at 1.1380 and the September 20 highs.
However, the exchange rate is likely to struggle to make those gains because of the location of the 200-day moving average (MA) presenting a barrier of resistance at 1.1327.
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