Euro to Remain Bid Against Pound Sterling While Above 0.8872 say Exchange Rate Analysts
The Euro to Pound Sterling exchange rate ultimately remains pointed higher argue analysts but most don't see gains extending beyond the flash-crash highs.
To those watching the perplexing reaction of the British Pound to strong UK GDP figures released on the 27th of October it would appear the currency is dancing to its own tune.
Sterling gained temporary ground after the publication of the report, but the gains could not be sustained, even as short-term UK bond yields trended higher.
The CBI also reported retail sales grew at their fastest pace in over a year, but this too had no lasting positive impact on sterling.
When a currency doesn't rise on strong data beats it is probably time to consult the charts for clues as to where the next potential moves may be.
We take this view as the Pound's inability to move on data suggests technical considerations are likely holding sway, and more often than note technical trades are made based on the underlying structure of the market.
We note a rising 4-month trendline on the EUR/GBP charts is quite intstructive:
The market would suggest that the Euro will ultimately continue moving higher in tandem with the predictive qualities inherent in the trendline.
"EUR/GBP has partially filled the gap which was left at 0.8849 and the market is now showing signs of recovery ahead of the 4-month uptrend at 0.8872 - the currency pair remains immediately bid while above here. This support is reinforced by the 0.8724 August high and we look for this to hold." says analyst Karen Jones at .
However, we maintain the view that the pair will probably eventually break lower as the extra-long exhaustion bar which rose to the 0.94s on the day of the flash-crash probably marked a significant high which is unlikely to be breached.
Therefore, while there is scope for further gains we see a limit to the Euro's upside.
Swissquote Bank's Yann Quelenn sees a bearish triangle pattern in the recent consolidation after the flash crash spike highs:
“EUR/GBP lies within a symmetrical triangle. Hourly support is given at 0.8880 (21/10/2016 low) while resistance is given at 0.9026 (20/10/2016 high). Expect to show renewed bearish pressures.
This is certainly a near-term view that could be considered valid over coming days.
However, over the multi-week timeframe the analysts believes the Euro is likely to move higher:
"The technical structure suggests a growing upside momentum. The pair is trading far above from its 200 DMA.
“Strong resistance can be found at 0.9500 psychological level.”
Latest Pound/Euro Exchange Rates
  | Live: 1.1455▲ + 0.1%12 Month Best:1.2162 |
*Your Bank's Retail Rate
| 1.1066 - 1.1111 |
**Independent Specialist | 1.1295 - 1.134 Find out why this is a better rate |
* Bank rates according to latest IMTI data.
** RationalFX dealing desk quotation.
