EURGBP has been on the decline but could be due for a bounce once it tests the range support near the .8750 minor psychological level. Stochastic is on the move down to show that selling pressure is in play, but the oscillator is nearing oversold levels to signal a potential return in buyers.
The 100 SMA is also above the longer-term 200 SMA on the 4-hour time frame so the path of least resistance is to the upside, which suggests that the range support is more likely to hold than to break. If so, another bounce back to the resistance at .9015 could be underway.
Improving sentiment towards Brexit is currently supporting the pound against its counterparts as negotiating parties appear more amicable in reaching a deal. To top it off, UK data has been stronger than expected as net lending to individuals came in at 4.8 billion GBP versus the estimated 4.5 billion GBP figure.
In the euro zone, the ECB Financial Stability Review outlined risks associated with a stronger euro and higher interest rates. The rest of the review was generally upbeat in terms of economic assessment and outlook.
German retail sales and unemployment rate are due today, along with French and Italian preliminary CPI. However, traders might pay closer attention to euro zone CPI flash estimates as strong gains could renew expectations for an ECB hike next year. The headline reading is projected to climb from 1.4% to 1.6% while the core figure could rise from 0.9% to 1.0%.
By Kate Curtis from Trader’s Way