GBP/EUR Rate Tech Outlook: Target 1.1700 if 1.1620 High Breaks

Pound Sterling retains a positive bias against the Euro as we head into month-end with the GBP/EUR exchange rate trading at 1.1568.

The move higher in the Pound to Euro exchange rate comes a day after the conversion had broken below its ascending channel and fallen to lows of 1.1449.

Such a fall would typically be indicative of the uptrend failing, but we warned not to write off Sterling just yet as volatility surrounding the Article 50 event might muddy the waters.

Inded, subsequent price action saw the pair rebound as the Prime Minister struck a conciliatory tone in her EU exit speech and the rebound reinforced the technical viewpoint that the uptrend remains valid.

The conversion rate is now moving higher, rising back up towards the 1.1620 highs:

The short-term uptrend is therefore still technically intact as the correction lower, which saw the exchange rate pierce below the lower channel line, was only a three-wave move and thus potentially only corrective.

A break below the 1.1449 lows would change the trend as it would establish a new sequence of lower highs and lower lows.

Such a move would be expected to reach 1.1400 at the very least, perhaps even to the S2 monthly pivot at 1.1375.

Alternatively, a re-break above the 1.1620 highs would reconfirm the uptrend and see it move higher to a probable next target at 1.1700.

UK GDP and Business Investment Data Form Highlight for Sterling Over Coming Days

Although GDP data for the final quarter of 2016 is out at 08.30 GMT on Friday, March 31, it is just a third and final revision and therefore highly unlikely to surprise.

Markets are looking for the 2.0% annualised figure reported in January to be confirmed.

Keep an eye on business investment for the final quarter of 2016 though - there has been the argument made that Brexit has resulted in declining business investment intentions and the data could potentially confirm this.

Quarterly business investment data is forecast to have decline 1%, a figure either side of this could well move Sterling.

Data Ahead for the Euro

The major release for the Eurozone is inflation data for March, released on Friday, March 31 at 9.00 GMT.

The results will feed into the debate about whether the European Central Bank (ECB) is likely to wind down its stimulus efforts or not. A higher inflation print – particularly Core Inflation – will make it more likely the ECB will normalize policy sooner than previously expected.

A reduction of monetary stimulus would be positive for the Euro as it would result in higher interest rates which tend to lift currencies by attracting more inflows of foreign capital.

Headline inflation is forecast to show a 1.8% rise in March year-on-year.

Analysts at TD Securities think that there is a chance Eurozone (headline) inflation will slowdown in March; commenting on German CPI data they said:

“We look for inflation to ease off in March after Feb’s strong 2.2% (yoy) print, as the contribution from oil prices declines due to both lower base effects and their outright decline in March, and the timing of Easter leads to a further dip.”