Euro Sterling: Outlook for EUR/GBP Hard to Call, Declining Channel Tips Odds in Favour of the Bears

A look at the markets as we head into the London closing session shows the euro sterling exchange rate to be 0.05 pct down on last night's close at 0.8456.

Please note that this quote is a wholesale inter-bank market rate. Your bank will affix a charge at their discretion, hence why you never receive anything close to the market rate. However, an independent FX provider will guarantee to undercut your bank's offer, thus delivering more currency. Please learn more here.

Outlook for the euro to sterling rate

Luc Luyet at MIG Bank has consulted the charts and he tells us:

"EUR/GBP continues to move sideways near the  resistance implied by its 200 day moving  average. However, a further rise towards 0.8589  (the implied target from the double-bottom) is  expected as long as the support at 0.8422  (04/10/2013 low) holds. A resistance stands at  0.8510 (11/10/2013 high).
"The break of the resistance at 0.8471 (23/09/2013 high) indicates an exhaustion of the  medium-term bearish momentum. Even though  the medium-term declining channel favours a  mild bearish bias, a rise towards the resistance at 0.8652 is now favoured."

Sterling rate today

Turning to recent currency market action, we note sterling hit a two-week high against the dollar overnight as investors sold the U.S. currency across the board.

"A string of solid U.K. economic data recently has bolstered the view that the Bank of England will not increase monetary stimulus and that its next move will be an eventual reduction in its £375 billion asset purchase scheme," says Omer Esiner at Commonwealth Foreign Exchange.  

The euro meanwhile held near an overnight high of eight and a half-months against the struggling greenback. The outlook for the Fed to remain sidelined for longer than previously expected continues keep a lid on Treasury bond yields and the dollar.

While further upside for the single currency is likely, investors will become more alert to signs that euro zone policymaker are becoming concerned with the euro’s recent strength.

"Any increased rhetoric from ECB officials about the risks of as strong euro could increase the odds of a lending rate cut in the months ahead, which could limit some of the euro’s upside," says Esiner.