The Pound-to-Euro Rate 5-Day Technical Forecast, News and Data for the Coming Week

Our technical studies suggest the British Pound might be able to extend a recent recovery against the Euro over the near-term, but technical considerations might be superceded by the Bank of England's policy meeting due on Thursday.

The Pound-to-Euro exchange rate has moved higher to a fresh high of 1.0995 on Monday, September 11 in a recovery from the floor establishment on August 27 at 1.0725.

It has now reached just shy of the 1.10 level which we identify as a key chart rubicon.

The big question has to be, can the exchange rate push above 1.10's natural ceiling and really reverse the longer-term trend higher; or is it doomed to withdraw?

If there are big moves on the radar they are likely to come from Sterling because most of the events in the week ahead are domestic.

On Monday there is the vote in parliament on the Brexit bill, then there is inflation and wage data during the middle of the week, and finally the Bank of England (BOE) rate meeting on Thursday. 

No-one sees any major moves resulting from these events but with negotiations getting steadily more trenchant between the UK and EU, some volatility is not out of the question.

Steadily Progressing Higher and Nearing Major Trendline

Looking at the technical charts - the mini-uptrend which began at the August 29 lows remains intact despite some volatility last week, especially after the ECB rate meeting, when the Euro sprang higher, but then gave back the gains on the following day.

The market has overcome the tough obstacle of the monthly pivot (PP) at 1.0937 by moving above the 1.0975 level and forming a new high at 1.0980.

The next major resistance level is at the trendline (labelled 'A') in the mid 1.10s and our next upside target is at the expected point of contact of the trendline at 1.1015 - and our base case is for a continuation up to that target:

The level of the June 2011 lows is also nearby, increasing the resistance potential of 1.1015.

For confirmation of a clear break higher, which would be an extremely bullish signal, we would want to see a move above 1.1050.

That would activate the next target at 1.1085, at the level of the 50-day MA. 

The MACD momentum indicator is rising sharply and looking bullish, thus supporting the continuation of the mini-uptrend.

It is still below the zero-line, however, indicating the dominant trend is still down.

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Data and Events to Watch for the Pound

It looks set to be a busy week for the Pound with the Bank of England announcing their rate decision on Thursday, as well as data showing inflation, unemployment and wage growth.

The Bank of England is not widely expected to announce a change in policy on Thursday at 12.00 BST, and according to Canadian investment bank TD Securities, the voting is expected to show a 6-2 split in favour of keeping interest rates unchanged.

BK Asset Managment's Kathy Lien, highlights the continued weakness in "consumer spending and inflation," as a reason to expect the BOE not to, "veer away from its cautious tone."

Forecasters are expecting a rise in inflation when data is released at 09.30 on Tuesday, September 12.

The headline rate is expected to rise to 2.8% year-on-year from 2.6% in August 2016, and core inflation to 2.5% from 2.4% respectively.

Without a corresponding rise in wages, higher inflation is likely to weigh on the Pound rather than support it, as it simply results in everyone being poorer.

Which is why data out on Wednesday, September 10, is likely to be so important, as it will show the state of the UK labour market and wages. Expectations are for earnings to rise by 2.3% in August.

A beat on expectations in this number could prove to be supportive of Sterling.

Remember to keep an eye on politics at the start of the week as parliament intend to vote on the government's great repeal Brexit bill.

The Labour party are currently against the bill, which they say gives too much autonomous power to ministers to make changes to EU law once it is transposed into the UK legal system.

A small number of conservative MPs are also against the bill which means, the vote could be close given the government's slim majority.

A failure of the bill to pass, would cause volatility for the Pound with the most likely direction of travel being lower.

The time within which to negotiate Brexit is fast running out and any domestic legislative failures will only frustrate the process further.

However, damage would be limited as we would expect the domestic squables to have limited impact on negotiations themselves.

The increased uncertainty caused by the Bill's failure would argue for Sterling to devalue owing to the increased uncertainty such an outcome would bring.

However, we see little chance of Conservative lawmakers rebelling against the Government; the party's slim majority means there is little appetite for an election which they could well lose considering Labour and the Conservatives are near even in the polls.

News and Events for the Euro

Apart from commentary from ECB governing council members throughout the week, the main data releases and events are concentrated at the end of the week, when wage data and the trade balance are released at 10.00 BST on Friday 18.

Also on Friday is the start of the meeting of the EU's financial ministers which could provide interesting commentary.

As for commentary from ECB officials, the week starts with ECB's Coeure at 8.00 on Monday 11, Constancio at 14.45 on Tuesday, Mersche at 11.45 on Thursday and then again at 17.00, Nouy at 7.00 on Friday is followed by Lautenschlager at 9.15 on the same day.

Analysts will be paying specific attention to any further clarification of positions on the tapering of the ECB's asset purchase program.