Euro to Pound: Why EUR Bulls Will Still be Buying Next Week
The British pound’s protracted decline against the euro looks set to continue according to a leading technical strategist. Here is why.
The British pound will commence trade in the new week from a position of relative strength thanks to a late flourish on Friday.
In fact the pound has now advanced against the euro for three days in a row.
While this is by no means a turning point for the currency in our view, it does allow those hoping for a better sterling exchange rate to buy.
The late flourish came courtesy of a deal between David Cameron and European leaders being clenched; the deal has allowed Cameron to fix a referendum date for June the 23rd.
Read here to see why markets believe this particular date is a positive.
There is a chance that sterling will enjoy a strong end to February but we remain aware that any slip-ups in sentiment and data will be punished to a greater extend than the reward delivered on any good news.
Latest Pound/Euro Exchange Rates
  | Live: 1.1391▼ -0.13%12 Month Best:1.2162 |
*Your Bank's Retail Rate
| 1.1004 - 1.1049 |
**Independent Specialist | 1.1232 - 1.1277 Find out why this is a better rate |
* Bank rates according to latest IMTI data.
** RationalFX dealing desk quotation.
Why the Euro Will Likely Move Higher
The market’s ability to simply ignore the strong turnout in the retail sales data on Friday confirms that the dearth of support for GBP created by the Brexit question is all-encompassing.
This provides perfect conditions for the markets to trade according to the charts.
Those who discount the relevance of charting need to catch a wake-up; real-life trades are placed at key levels based on the charts and the market gets an insight into how it - the market itself - is structured and where future moves will be triggered.
The ability of charts to propagate a ‘self-fulfilling’ prophecy can be uncanny at times and should not be ignored, particularly when important fundamental data releases are being completely overlooked.
With this in mind the chart of EUR/GBP has been in a trend channel for the past 3 months and “the recent consolidation could give another opportunity for the bulls,” says Richard Perry at Hantec Markets.
Perry believes the signals being given in the EUR to GBP are so significant he has named it the ‘chart of the day.’
“The channel support comes in today at £0.7655 which could be tested as the euro has come in for a degree of selling pressure in the past few sessions. However, there seems to be some interesting support around £0.7700 which is holding near term, whilst the rising 21 day moving average is also a basis of support coming in around £0.7685,” says Perry.
The medium term configuration of the momentum suggests to Perry that corrections are still a chance to buy and the daily RSI around 60 has tended to be where the bulls have returned in this strong trend.
“I would expect the euro bulls to regain control for a test of Wednesday’s high at £0.7845 and ultimately the recent rally high at £0.7897. Below £0.7700 would question the bull control,” says Perry.
