EURGBP has formed higher lows on its 1-hour chart and is testing resistance at the .8575, creating an ascending triangle formation. Price is approaching the peak of the triangle so a breakout in either direction might be due soon, taking price by around 150-200 pips higher or lower, which is the same height as the chart pattern.
The 100 SMA is below the longer-term 200 SMA so the path of least resistance is to the downside. However, the moving averages still seem to be oscillating so range-bound action could stay in play.
Stochastic is turning higher to show that buyers are trying to regain control of price action. But if the oscillator reaches the overbought region and turns lower, sellers could take over and push for another test of support at .8450.
Economic data from the euro zone has been mostly stronger than expected this week, particularly when it comes to flash CPI readings for the region. Also, manufacturing and services PMI readings from its top economies have surpassed expectations and some were even revised higher.
UK reports have also come in better than consensus, which explains the current consolidation for the pair. Manufacturing, construction, and services PMI readings have printed surprise gains, reflecting the economy’s resilience despite Brexit uncertainties.
German factory orders and retail sales data are lined up today and another batch of strong readings could mean more gains for the shared currency. There are no major reports lined up from the UK today so the pound might be sensitive to country-specific moves.
By Kate Curtis from Trader’s Way