Comment: Very big intra-day moves have formed a large ‘head-and-shoulders’ top in Euro/sterling, completed yesterday with a close below the ‘neckline’. This adds weight to our view that an interim high has probably formed and that we shall hold below here at least until the end of this year. However, while above 0.8400 which is two standard deviations from the equivalent long term mean at 0.7135, the danger is that EUR/GBP may re-test the all-time high (and weakest ever for sterling) at 0.9805. For the next couple of months we favour random, fairly sharp swings, between 0.9200 and 0.8600 (the measured target from the pattern, maybe 0.8400 (1.6 times size of ‘head’).
A weekly close above 0.9300 would probably set off another concerted upside push.
