Market Analysis

EURGBP Bulls Chart Their Course

Traders who might continue to favour a higher euro/sterling (EURGBP) will nevertheless be conscious that the pair is trading at the top end of its recent range. Traders will always make up their own minds but might find it useful to be acquainted with the technical views of some commentators. France’s Natixis Bank, writing on Monday, isn’t ruling out a re-test of 0.8750 on the downside but overall feels “the outlook is extremely favourable” for a higher EURGBP. Natixis’ technical analysts feel “an ascending channel has developed in the daily chart, weekly volatility has picked up and weekly indicators are upbeat, all of which also suggests the pair has significant upside potential.” Consequently, the French bank wrote ” in this context, dips will be seen as corrective and the EURGBP is expected to head towards 0.8865-0.8880 (ascending resistance trendline) before 0.8933-0.8946 (Fibonacci projections) and 0.8993-0.90 (descending resistance trendline). A test of the resistance around 0.9038-0.9050 (upper band of quarterly Bollinger) is also on the cards.”

ThomsonReuters IFR’s (TRIFR) technical analysts are also bullish on EURGBP, and feel that “a rise above 0.90 could be on the cards.” “Last Friday’s rally to 0.8860 negated bullish signals from earlier in the week.” TRIFR wrote on Monday, adding that “the move higher broke 0.8854 which was the 50 per cent [Fibonacci] retracement of the July-September 2016 0.9403 to 0.8305 fall.” In their view a daily close above that level “would bring the 61.8% [Fibonacci level] of that move at 0.8484 into play where a break then risks a full retracement to the 0.9403 July 2016 peak.” “The fact that last week’s pullback held above the top of the weekly cloud was another encouraging sign for the bulls,” TRIFR added, while noting that “this week the cloud stands at 0.8726 and any pullbacks need to hold above there to keep the bullish bias intact.”