EUR / GBP Exchange Rate at a Crossroads, Breakout Could be Imminent

Beware a big move in the Euro to Pound Sterling exchange rate (EUR/GBP) ahead which could ultimately deliver a rise to 1.0.

Technical analyst Richard Perry at Hantec Markets has studied the charts of EUR/GBP and named it his 'chart of the day' having noted it poses some interesting moves in the future for traders.

The exchange rate has been climbing steadily since May with Perry describing the move higher as a “one way bet”.

Yes, there has been the odd near term corrective pullback, “however the outlook has remained strong throughout and momentum indicators have been strongly configured to suggest that corrections are a chance to buy,” says Perry.

The technical trend for further Euro gains is increasingly backed by a fundamental picture where big-name fundamental analysts are seen to be increasingly of the opinion the EUR/GBP's rally might continue towards parity in the coming months.

However, Perry says a key near term crossroads has now been reached:

“The £0.9140 resistance of a reaction high in October is the key multi-year resistance on the pair (aside from the day of the sterling flash-crash where price liquidity was sporadic to say the least).

“The market has tested the resistance throughout this week but as yet the barrier remains intact.

“This comes as momentum remains strongly configured, with the RSI around 70 along with strong MACD and Stochastics.”

This leads Perry to ask whether the market is ready to breakout?

What happens at the following key levels will be key to answering this question.

“The hourly chart reveals a slight waning of momentum with the hourly RSI dropping back towards 30 yesterday and MACD lines showing a slight negative divergence. The support at £0.9050/£0.9060 is now key after yesterday’s intraday rebound,” says Perry.

The support of a five week uptrend comes in at £0.9075 today and it is hard to bet against it, “but the hourly chart is throwing up a few questions the bulls need to answer,” notes the analyst.

Those with parity on the mind must look for a a closing breakout above £0.9140 which Perry says would effectively open parity although there would be some regard given to the flash-crash high at £0.9365.

“The support of this week’s lows 0.9050/0.9060 are key,” says the analyst.

Get up to 5% more foreign exchange by using a specialist provider by getting closer to the real market rate and avoid the gaping spreads charged by your bank for international payments. Learn more here.

Elsewhere, Credit Suisse technical analyst Christopher Hine says the strong rally in EUR/GBP since April this year is reinforced by its large base set above 0.8852.

“This keeps the immediate risk still higher to test our next target at the 78.6% retracement of the October/December 2016 fall at 0.9142/68 next,” says Hine.

Should 0.9142/68 give way Hine warns there is a “price vacuum up until our core target at 0.9400/14.”

Geopolitics: Europe's Battle with Terror Continues

Headlines will prove a distraction for markets on news of a major terror attack in Spain's Catalonia region.

13 people were killed in an attack in Barcelona after a van drove into crowds before five suspects have been shot dead as police intercepted a car that was running people down in the Spanish town of Cambrils.

A picture is emerging this morning of an apparently coordinated terror plot to hit multiple targets across the country’s Catalonia region.

"It was also a sea of red on European share market bourses. Investors showed favour for safer-haven assets like bonds, after a tragic terrorist attack in Spain," says Janu Chan, an economist with St. George Bank.