EURGBP is still trending higher on its daily time frame, just slightly above the rising trend line connecting the recent lows of price action. Price is making a pullback to this support area, which lines up with the 38.2% to 50% Fibonacci retracement levels around .8800-.8900.
A bounce off this support zone could lead to a climb back to the previous highs at .9200 while a break lower could spark a larger correction. The 61.8% Fibonacci retracement level lines up with a broken resistance area, which might hold as support moving forward.
The 100 SMA is above the longer-term 200 SMA so the path of least resistance is still to the upside. However, stochastic is pointing down to show that sellers are in control for the time being and that further losses are possible until the oscillator reaches the oversold area.
Economic data from the euro zone was mostly stronger than expected yesterday. Only the French flash services PMI fell short of estimates as it fell from a downgraded 53.3 figure to 52.1 instead of improving to 54.1. The rest of the manufacturing and services PMIs from Germany, France, and the rest of the region showed stronger improvements.
Germany’s IFO business climate index is due today and a rise from 109.5 to 109.6 is eyed. Also on today’s schedule is a speech by ECB Governor Draghi who could reiterate that they’re not looking to taper asset purchases just yet.
As for the pound, the UK CBI industrial order expectations showed a fall from -5 to -17 versus the projected rise to -2, reflecting weakening demand. BOE Governor Carney has a testimony lined up today and any hints on monetary policy could bring volatility to EURGBP.
By Kate Curtis from Trader’s Way