Surprisingly, the star performer in global FX over the past three days has been GBP, but as we move through the final half of the week it looks like the currency is starting to come off the boil.
- Pound to Euro exchange rate today:1.1707
- Euro to Pound exchange rate today: 0.8512
Looking at the chart of EUR/GBP and we see the pair has pulled back from its highs and lost considerable ground.
Lloyds Bank’s Robin Wilkin sees 0.8450 as an important line in the sand, with a break below that level suggesting a “top is in place.”
Therefore, as long as the Euro remains above there it is likely to continue trending higher.
Commerzbank’s Karen Jones says she sees the pair as rising in a channel or wedge formation, with the current correction likely to find support at a lower support line at 0.8440.
A break below that line, however, would probably lead to a steep breakdown.
We see a move down to the 0.8450 level as likely, given the mini-down-trend now in place.
As such a break below the current 0.8482 lows would probably then lead to continuation down to 0.8450.
Turning the equation around from a GBP into EUR perspective, the pair is basically in a very young mini-up-trend which until it reverses is likely to move higher.
The MACD is turning up in the bottom pane adding support to the marginal upside bias.
There is however a considerably skein of resistance starting at 1.1840 and stretching up to about 1.1860, which is likely to prove tough for the exchange rate to move above.
The likelihood is that the pair will move up to 1.1840 and then stall, retract and possibly rotate back down.
The Pound to Dollar Outlook
In the case of GBP/USD the pair has fulfilled its promise of forming a double bottom pattern at the lows.
Although it has not quite risen to neckline in the late 1.33s, it has made a high of 1.3274, not far off our 1.33 target.
Of course a clear break above the neckline and the 1.3400 pivotal level would probably open the gates to an extension up to 1.36, and then perchance even 1.38.
Lloyds’s Wilkin’s is mildly biased to a bullish perspective, especially if the pair moves above the current 1.3274 highs it looks set to reach 1.33 and even 1.3480:
“The market is testing the first of three key resistance levels. 1.3250/70 is trend and channel resistance, with a break here leaving the 1.3306 early August high and 1.3480 mid-July highs as the next levels. A move through these levels will add further conviction that we are going to extend the recovery towards 1.3650-1.3850 key longer-term resistance.” Commented the Lloyds analyst.