GBP/EUR Exchange Rate: Forecasting Further Gains to 1.1800, as Up-Trend Stays Intact
Our latest technical studies confirm Pound Sterling to be in a short-term uptrend against the Euro and we view 1.1800 and 1.2000 as possible upside targets.
The British Pound has stalled after a strong move higher based on hopes the UK would secure a better trade deal with Donald Trump, or that political instability in the Eurozone might see the EU’s hard line soften in Brexit negotiations.
Consolidation is taking place in GBP/EUR above 1.16 support but below 1.1670 resistance.
Despite upside momentum fading the the short-term trend remains bullish and is likely to extend.
Strong support just below the current exchange rate from the R1 monthly pivot at 1.1585 is also likely to act as a prevention to further downside.
The bullish MACD momentum indicator in the lower pane has just moved above its zero-line, indicating more upside it probably in the pipeline.
Whilst the previous day’s dragonfly doji Japanese candlestick is a potentially bearish sign coming as it does at the move highs, there is as yet insufficient evidence suggesting the trend may be turning.
The possibility of a deeper correction emerging cannot be dismissed.
That said, a break above the 1.1664 highs would probably confirm a continuation up to 1.1800, followed by 1.2000.
Our expectations for further upside gel with the views held by institutional analysts such as Nomura who are eyeing a potential move to 1.19 as the current period of short-covering could yet extend further.
Euro Remains Under Pressure
Pound Sterling is taking advantage of a Euro which has come under pressure of late.
"The euro remains under pressure, likely related to political uncertainties and expectations of an ECB announcement of further stimulus next month in light of weak domestic price pressures," say analysts at Lloyds Bank in a foreign exchange briefing to clients.
The EUR/USD fell below 1.07 for the first time this year, partly a reflection of US Dollar strength with a December Fed hike increasingly seen as a done deal.
As long as EUR/USD remains under pressure we would expect GBP/EUR to benefit.
