Euro Exchange Rates Forecast to Recover
- Written by: Gary Howes
The prospect of a rebound in the euro exchange rate complex is growing following days of sustained selling pressure which has left the move lower over-extended.
The pound has reversed in severe fashion as markets get the message from the Bank of England that interest rates are simply not going to rise for a long, long time. The GBP had been bid higher on the assumption that a growing economy warranted higher rates which in turn commands a stronger currency.
The GBP has moved higher in November thanks to strong UK data releases, but the move may have been unwarranted.
Our analysis of the Relative Strength Index confirms that trajectory lower in the euro to pound sterling rate (EURGBP) looks particularly tired at this stage.
Others are in agreement.
“My modelling of the EUR pairs is giving me some very interesting results and I really like the risk-reward around the long EUR play near current levels,” argues professional retail trader Shaun Lee at Forextell.
Lloyds Bank are in agreement:
"The GBP has continued to trade well at the start of this week, but technical indicators are warning the move is a little overdone in the near term, especially in EURGBP.”
The euro has since risen against sterling and is correcting its oversold status. The move higher from the recent lows should not come as a surprise either as there is historical precedent for the pair to recover from this level.
“EUR/GBP is approaching very strong technical support levels near .7000/25, EUR/AUD is holding above support at 1.5150 and EUR/NZD has again bounced off its springboard base near 1.6200,” warns Lee.
Throw into the mix the heavily bearish sentiment and heavy short positioning in certain speculative sectors, and Lee says he starts to get the feeling that the EUR is ripe for a sharp rebound.
Turning to the euro / dollar exchange rate, the move sideways in a 1.08/1.16 range has now been in place for the last 6 months, “and as we know, the FX market does like to range trade,” says Lee.
Is it time to buy the euro ahead of a recovery?
