EURGBP has been trading sideways recently, finding resistance around the .9000 major psychological level and support near the .8750 minor psychological mark. Price has just bounced off the ceiling and is halfway through on its way to the floor.
The 100 SMA is below the longer-term 200 SMA on this time frame so the path of least resistance is to the downside, which suggests that sellers could take it all the way down to the range support.
However, stochastic is already dipping to oversold levels, which signals exhaustion among sellers and a potential return in buying pressure. In that case, the moving averages might hold as dynamic inflection points around the middle of the range.
Uncertainty in German politics has weighed on the euro for the most part of the week as German Chancellor Merkel failed to strike a coalition with the Greens and FDP over the weekend. This could prompt the call for another round of elections, which could keep the shared currency in limbo for a while.
However, euro zone fundamentals remain stable and upcoming PMI readings could hint at further improvements. The ECB minutes are up for release, though, and their latest decision was considered a “dovish taper” announcement.
As for the pound, the BOE Inflation Report hearings could prove to be an event risk as this would contain more details on the central bank’s inflation outlook and rate hike bias. The Treasury’s Autumn Forecast Statement is also scheduled later in the week and would have updated economic estimates.
By Kate Curtis from Trader’s Way