EURGBP has been falling for the past few months but a reversal pattern has just formed on its daily chart. This indicates that an uptrend may start as soon as price breaks past the .8000-.8050 resistance levels.
If the .8000 mark holds as resistance though, price could make another bottom around the .7800 handle. Stochastic is already in the overbought area anyway, indicating that buying pressure is weakening.
On the other hand, a push past the .8050 area could mean as much as 250 pips in gains for EURGBP as the chart pattern is roughly of the same height. Further gains could take it to the next resistance zone at .8350.
Recall that the BOE just dumped its bias to tighten early next year, citing weak inflationary pressures and a potential drag from the euro zone. Meanwhile, data from the euro zone hasn’t been so bad recently, as the region was able to escape an economic contraction so far.
Event risks for this trade today include the release of UK CPI data, which might add support to the central bank’s dovish bias. German and euro zone ZEW economic sentiment figures are also due today and might add to volatility.
By Kate Curtis from Trader’s Way