EURGBP is still trending higher as it tests the top of the ascending channel resistance visible on the 4-hour time frame. Stochastic is moving up to signal that there’s still some bullish pressure left but the oscillator is also closing in on the overbought zone to indicate potential profit-taking.
If that happens, price could pull back to the channel support near the .8900 major psychological mark. However, the 100 SMA is above the longer-term 200 SMA to signal that the path of least resistance is to the upside. The gap between the moving averages is also widening to indicate stronger bullish momentum.
A small pullback could last until the mid-channel area of interest close to the 100 SMA dynamic support or find a floor closer to the 200 SMA dynamic inflection point. Sustained buying momentum could even lead to an upside break of resistance at .9100 and a steeper rally.
Euro zone economic reports have been mostly stronger than expected so far this week, supporting the odds of ECB tapering before the end of the year. Data from the UK has been less upbeat, with manufacturing production falling flat and the goods trade balance showing a larger deficit of 12.7 billion GBP.
German and French final CPI readings are due today and no downgrades could allow the shared currency to hold on to its gains. There are no reports due from the UK economy so traders might hold out until next week’s batch of top-tier data, which includes CPI, jobs, and retail sales figures.
By Kate Curtis from Trader’s Way