EURGBP seems to be tired from its dive as the pair failed in its last two attempts to break below the .8500 level. Price has now completed a double bottom formation and is testing the neckline at .8650. A break above this resistance could send price up by 150 pips or the same height as the chart formation.
The 100 SMA just crossed above the longer-term 200 SMA to signal that the path of least resistance is to the upside. A pullback could last until the moving averages, which might hold as dynamic support around the .8550 minor psychological level.
Stochastic is turning lower to suggest that sellers are taking control of price action. Stronger bearish pressure could take EURGBP back down to the bottoms at .8500 for another test of support or perhaps a breakdown.
Economic data from the euro zone came in mostly in line with expectations last week when it came to PMI readings but the headline flash CPI estimate turned out stronger than expected. Meanwhile, PMI readings from the UK fell short, signaling that the economy may be starting to feel Brexit jitters.
German factory orders and euro zone retail PMI figures are due today. The former is expected to show a 0.6% rebound from the earlier 2.5% slide while the latter could improve from 50.4. There are no major reports due from the UK today.
Several medium-tier reports such as French industrial production and German trade balance are lined up from the euro zone for the rest of the week. UK manufacturing and industrial production numbers are scheduled for release on Friday and weak readings could spur more losses for the pound.
By Kate Curtis from Trader’s Way