EUR/GBP Under Significant Pressure at Start of November

The euro has enjoyed fresh strength against the British pound (GBP) for much of the past month, however a number of analysts says traders should be ready for the longer-term downtrend to ultimately reassert itself.

This leaves us asking, what levels should we be watching?

At the time of writing we note sterling has made strong advances which will encourage some traders to jump into the market to back the strengthening trend.

• The pound to euro exchange rate (GBP/EUR) is at 1.2760.
• The euro to pound exchange rate (EUR/GBP) is at 0.7838.

A look at recent price action shows the following:

Beware: If you are looking for a higher rate make sure your currency specialist has placed the relevant stop-loss and buy orders in place to ensure you get the right rate when it is hit, find out how here.
Also Note, all the above levels are from the inter-bank markets - your bank will affix a spread at their discretion when passing on a retail rate. However, an independent provider will seek to undercut your bank, thereby delivering up to 5% more FX in some instances. Please find out more.

Near-Term Bets Are on Further Falls for EUR/GBP

For the euro pound exchange rate we note that there has yet to be a close below the 0.7874 level while rallies have been seen terminating at around the 0.7910 marker.

If we are to see the pound run higher it will surely need to break up through the key resistance point, that is also the 2 year pivot line, and the 2013-2014 downtrend at 0.8050/83 which marks the upper end of the range seen in our image.

"While capped here we are longer term still negative. Reinforcing this resistance is the 0.8083 50% retracement of the move down from March and the 200 day ma at 0.8084," says Karen Jones at Commerzbank.

As such, Commerzbank recommend that traders take out 'sell' positions on the EUR/GBP in anticipation of further declines.

A stop loss is recommended at 0.7960 while traders should be happy to book profit at 0.7825.

For those with a longer-term view on the euro pound exchange rate analyst Luc Luyet at Swissquote Research has the following observations:

"EUR/GBP is trying to bounce. However, the short-term technical structure remains negative as long as prices are below the hourly resistance at 0.7942 (21/10/2014 high). Hourly supports can now be found at 0.7862 and 0.7821 (03/10/2014
low).

"In the longer term, the underlying downtrend favours a test of the major support area between 0.7755 (23/07/2012 low) and 0.7694 (20/10/2008 low) at minimum. A decisive break of the resistance at 0.8034 (25/06/2014 high) is needed to suggest some exhaustion in the medium-term selling pressures."

Sterling Down vs the Euro

Sterling has found itself caught in a rut against the shared currency in recent weeks:

"Against the euro it struggled as there was no major UK data release and sterling started to trend downwards after failing to break through overnight resistance levels. An unexpected rise in German import prices saw sterling continue to fall away against the euro although it still remains well placed against the single currency," notes Charles Purdy at Smart Currency Business.

Conversely, sterling hit a week-long high against the US dollar as durable goods orders disappointed.

The largest move of the day for sterling came against the Swedish krona, where the unexpected decision by the Swedish Central Bank to slash interest rates to 0% saw sterling gain over 1% against the krona throughout the course of the day.