British GBP/EUR X-Rate Techs: Only a Break Below 1.1650 Would Invalidate Uptrend
Pound Sterling has shown some impressive resillience against the Euro of late which confirms to us the uptrend remains alive.
Over recent days the GBP/EUR pair had been looking 'toppy' and at risk of breaking lower as upside momentum waned.
Indeed, the GBP/EUR did suffer a steep sell-off from the 1.1820 highs reached on Thursday, November 24 to reach a weekly low at 1.1702.
But the pair did manage to retrace those losses heading into the weekend and it managed a weekly close at 1.1786.
Calm-headed strategists will not be surprised by this resillience as they would have need to see a couple of technical signals fulfilled before panicking and abandoning Sterling.
From a technical perspective, GBP/EUR has halted a move lower within a rising channel, which has the look and feel of an 'ending diagonal' topping pattern.
This is a form of Elliot wave pattern which occurs at the final stage of a trend and would seem to indicate a possible end to the uptrend.
Therefore it is still too early to argue the uptrend is over, and we would require confirmation from a break below the 1.1650 level for confirmation of a deeper pullback.
On such an occurance the next target between 1.1580 and 1.1520, calculated by extrapolating 61.8%-100% of the height of the channel down from the point of the break.
Alternatively, so optimistic is the data, there is now a very real probability the already established uptrend will extend higher towards to the next target at 1.1900.
An extension higher would require a break above the current 1.1820 highs for confirmation.
An uptrend bias is also supported by Q3 GDP data also released on Friday morning further supported a resilient outlook for the UK economy, after coming out in line with analysts’ expectations, at 0.5% QoQ and 2.3% YoY.
GBP/EUR
Daily Chart Showing live Inter-Bank Rate and Indicative Rates for International Payments.
Business Investment Data Supports Sterling
The GBP recovery into the weekend can be partly attributed to some better-than-expected Business Investment data for Q3 was released.
The reading of 0.9% QoQ, compared to the 0.6% expected, helped boost the Pound.
Business Investment is one of the areas of the economy which was expected to be most heavily hit by Brexit given the uncertainty about the UK’s current free trade agreement and access to European markets.
Economists would have taken heart from the figures which were better than forecasts and this has helped the Sterling to recover.
