It's Alive! The Euro to Pound Exchange Rate Uptrend Could Even Hit 0.88 Target

The euro exchange rate complex is moving higher at the start of the new month.

• The euro to pound exchange rate has today reached a conversion of 0.7954.
• Lloyds see next target at 0.80 ahead of potential attainment of 0.88.

The pound is lower against the shared currency as April gets under way despite some rather good GDP numbers being announced a mere 24 hours earlier.

The euro's move higher against sterling echoes similar strength seen against the US dollar with EUR/USD trading higher by half a percent at 1.139, suggesting the theme of euro buying is not specific to just the EUR/GBP pair.

EUR/GBP has been in a strong uptrend since breaking out above the 0.7490 range highs in January. Recently, on March 24, it made a new 14-month high of 0.7945.

Despite some ups and downs in March we appear to be on the cusp of a decisive break higher.

Latest Pound/Euro Exchange Rates

	Live: 1.1446▲ + 0.03% 12 Month Best: 1.2162
*Your Bank's Retail Rate	1.1057 - 1.1103
**Independent Specialist	1.1286 - 1.1332 Find out why this is a better rate

* Bank rates according to latest IMTI data.

** RationalFX dealing desk quotation.

 

We have moved back to the recent highs, having held 0.7850 support on the most recent pullback.

"A clear break of 0.7950/60is needed to suggest a stronger move towards 0.80/0.82. While under, we remain wary of a deeper correction back towards range support, confirmed by a break of 0.7880/50 support," says Robin Wilin at Lloyds Bank.

Long-term the rally from the 0.6935 lows set in July 2015 remains intact suggests Wilkin while over 0.7655/0.7450 support, which looks set to test more meaningful resistance in the 0.80-0.82 region.

"However, we expect this area to hold the topside for a move back into a broader range around 0.7500. If 0.82 is broken the risks are for a stronger move towards 0.87/0.88," warns the analyst.

200 Week Moving Average Stands in the Way

The 200-week moving average at 0.7933 has successfully capped gains for the pair, and it is likely to prove a formidable obstacle going forward as increased numbers of traders are likely to cluster sell orders there.

The RSI signal gives clues to a loss in momentum, this momentum indicator, helps determine whether a move is set to continue or is in fact failing.

The RSI on EUR/GBP's daily charts is not rising fast enough, or as far as the exchange rate, and this lack of confirmation concerns Commerzbank’ analyst Karen Jones, who suggests it may be hinting at deeper losses:

“EUR/GBP’s new high of 0.7945 has been accompanied by a divergence of the daily RSI, which is reflecting a loss of upside momentum near the previous high – this does not bode well for the up-move.”

This combined with the presence of the 200-week moving average overhead gives a bearish taint to the chart.

“The market is losing upside momentum at the 200 week moving average at 0.7933,” confirms Jones.

The next support zone is at 0.7790 or 0.7757; a break below this zone would probably lead to a hefty move back down to the mid-0.75s.

Rising Channel Forecast to Rise Further

When forecasting currencies, timeframes are key.

Jones is approaching the euro v pound exchange rate in a short- to medium-term timeframe.

Looking at the bigger, multi-month, picture reveals the euro could yet rise further.

Analysts at online lender Swissquote see EUR/GBP rising in a channel which is likely to, “show continued increase.”

They see hourly resistance at the March 24 high (0.7945) and support at 0.7774. Longer-term they forecast a continuation higher:

“In the long-term, the technical structure suggests a growing upside momentum. The pair is trading well above its 200 day moving average.

"Strong resistance can be found at 0.8066 (10/09/2014) high."  This suggests that multi-month 0.8066 is a feasible target.