The pair has been in a downward channel ever since August 2013. Lower lows and lower highs have been the rule until the beginning of last month when the pair finally broke out of this channel.
It did touch the 0.8400 level before slowly reversing to 0.8300 at the end of March. This month, the pair has traded between 0.8300 and 0.8200 –with no real clear direction.
On Tuesday 22 April, a support level at 0.8200 was touched before being rejected the following day as it climbed to 0.8250.
The problem with direction for this pair is that both economies are, at the moment, moving in the same direction.
In the UK, we saw ILO unemployment figures falling to a low of 6.9% this week. Over in the EU, the composite Markit PMI came in at 54 versus an estimate of 53.1, hitting a three year high in business activity.
The UK is also supported by a strong housing market and the prospect of an earlier than expected rise in interest rates. This anticipation has been giving the pound support throughout this year and has helped to keep the euro in check.
On the other hand, the eurozone has the full support from Draghi and the ECB. If deflation becomes a real issue in their eyes, the ECB would not hesitate to act.
_20140423150247.jpg "EURGBP")
Going forward, the pair is supported by a textbook technical setup. A support area has formed between 0.8180 and 0.8200. This area has been tested six times throughout the course of the year and it has always held up. The pound did not have the power, on any single day, to close below these levels. This indicates that there is strong buying interest in this area. Speaking as a true bull: any dips are seen as buying opportunities.
However, since the euro has been beaten by the pound for an extended time now, it remains to be seen whether the pound doesn’t pick up speed and break through this crucial support area. If this happens, the gates will open to a lower level with the first target being 0.8150.
The pressure would then be on the euro to find the strength to break through 0.8180 which has recently been a strong resistance area.
Spread bets and CFDs are leveraged products. Spread betting and CFD trading may not be suitable for everyone and can result in losses that exceed your initial deposit, so please ensure that you fully understand the risks involved.
This information has been prepared by IG, a trading name of IG Markets Limited. The material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
It did touch the 0.8400 level before slowly reversing to 0.8300 at the end of March. This month, the pair has traded between 0.8300 and 0.8200 –with no real clear direction.
On Tuesday 22 April, a support level at 0.8200 was touched before being rejected the following day as it climbed to 0.8250.
The problem with direction for this pair is that both economies are, at the moment, moving in the same direction.
In the UK, we saw ILO unemployment figures falling to a low of 6.9% this week. Over in the EU, the composite Markit PMI came in at 54 versus an estimate of 53.1, hitting a three year high in business activity.
The UK is also supported by a strong housing market and the prospect of an earlier than expected rise in interest rates. This anticipation has been giving the pound support throughout this year and has helped to keep the euro in check.
On the other hand, the eurozone has the full support from Draghi and the ECB. If deflation becomes a real issue in their eyes, the ECB would not hesitate to act.
Going forward, the pair is supported by a textbook technical setup. A support area has formed between 0.8180 and 0.8200. This area has been tested six times throughout the course of the year and it has always held up. The pound did not have the power, on any single day, to close below these levels. This indicates that there is strong buying interest in this area. Speaking as a true bull: any dips are seen as buying opportunities.
However, since the euro has been beaten by the pound for an extended time now, it remains to be seen whether the pound doesn’t pick up speed and break through this crucial support area. If this happens, the gates will open to a lower level with the first target being 0.8150.
The pressure would then be on the euro to find the strength to break through 0.8180 which has recently been a strong resistance area.
Spread bets and CFDs are leveraged products. Spread betting and CFD trading may not be suitable for everyone and can result in losses that exceed your initial deposit, so please ensure that you fully understand the risks involved.
This information has been prepared by IG, a trading name of IG Markets Limited. The material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
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