EURGBP has been moving in an ascending channel visible on its longer-term time frames and is just testing the resistance. Price seems to be making a correction from the uptrend at this point and applying the Fib tool on the latest swing high and low shows that the 61.8% Fib lines up with the channel support at the .8500 major psychological level.
Price is also drawing support from the 100 SMA dynamic inflection point for now. This short-term moving average is above the longer-term 200 SMA so the path of least resistance is to the upside and the rally could resume later on. Also, the gap between the moving averages is widening, which means bullish momentum is strengthening.
Stochastic is already indicating oversold conditions, which means that sellers might need to take a break and let buyers take over. More buying pressure could be seen once this oscillator climbs back above the oversold area. In that case, EURGBP could climb back up to the previous highs around .8725.
Economic data from the euro zone was mostly weaker than expected yesterday. French flash manufacturing PMI fell from 48.6 to 48.5 but services PMI was up from 50.5 to 52.0. German flash manufacturing PMI fell from 53.8 to 53.6 while services PMI dropped from 54.4 to 53.3.
As for the UK, the CBI industrial order expectations index dipped from -4 to -5, better than the projected fall to -9 but still indicative of a faster pace of contraction. BBA mortgage approvals data is due today and a decline from 40.1K to 38.5 is eyed.
German final GDP is due today and a small downgrade from 0.4% to 0.3% is expected. Later on in the week, the UK will also released a revised version of its Q2 GDP, although no changes from the initially reported 0.6% growth figure is expected.
By Kate Curtis from Trader’s Way