EURGBP has formed higher lows and found resistance at the .7900 area, creating an ascending triangle pattern on its 4-hour time frame. Price is currently testing the triangle resistance at the moment and an upside breakout seems imminent.
In that case, price could head north by an additional 400 pips, which is roughly the same height as the chart formation. The 100 SMA is above the 200 SMA, confirming that the path of least resistance is to the upside.
However, stochastic is moving down from the overbought zone, suggesting that a drop back to the triangle support might still be possible. RSI is also in the overbought area so a selloff might take place if sellers take control.
Data from the euro zone came in mixed yesterday, as German retail sales fell short of expectations with a 0.4% decline instead of the projected 0.3% uptick while French consumer spending beat expectations with a 0.6% gain versus the estimated 0.1% uptick. The French preliminary CPI also beat expectations while the Spanish flash CPI and German unemployment change came up short.
As for the UK, the current account balance showed a much larger than expected deficit of 32.7 billion GBP while the previous reading was revised to show a larger shortfall than initially reported. On the upside, its final GDP reading was revised slightly higher from 0.5% to 0.6%. The UK manufacturing PMI is due today and a rise from 50.8 to 51.4 is eyed.
By Kate Curtis from Trader’s Way