Bears have failed to push the GBP/EUR exchange rate below the 50-day moving average allowing the pair to bounce on better-than-forecast data.
- Pound to Euro exchange rate today:1.1859
- Euro to Pound Sterling exchange rate today: 0.8430
GBP/EUR has rebounded after basing at a tough line of support.
The support came from the neckline of a probable double-bottom basing pattern at the lows and the 50-day moving average:
The fact they were both supporting the exchange rate at the 1.1800 level meant there was a higher chance the support would hold and the exchange rate would rotate and move higher again.
We expect the rebound to continue towards an eventual target calculated from the height of the double-bottom at 1.2142.
It may come in two steps, however, given there is level at 1.2020 which is likely to provide a barrier to further gains.
Initially, a break above the 1.1910 level could provide the necessary confirmation for the first leg up to 1.2020.
Then a break above 1.2050, and resistance from the R1 monthly pivot - a level used by traders to gauge the strength of the trend –signalling a continuation to the eventual minimum target for the pattern at 1.2142.
FX Analysts Yann Quellenn at online broker Swissquote supports a bullish view of the pair, arguing that as long as it remains above 1.1764 (0.85 for EUR/GBP), “this confirms the underlying bullish momentum of the pair.”
The only data out for the pound this week so far has been the Conference Board Leading Indicator of economic activity which imporved from -0.3% to 0.0%.
From a fundamental perspective the pair may come under more pressure due to growing expectations that central banks may be increasingly unwilling to use more stimulus, as exemplified by the actions of the European Central Bank (ECB) last Thursday, and this change in sentiment is likely to lead to further euro gains.
The Bank of England (BOE), however, looks less likely to consider switching off its ‘printing presses’ given recent comments to the contrary from its governor, and this is likely to devalue sterling more than the euro, especially given the imminent meeting on Thursday.
Pound Sterling Today
Sterling hit a Sept 1 low against the dollar with global monetary policies taking center stage.
U.K. monetary policy ranks high among the sources of pound weakness after the Bank of England recently dropped rates to barely above zero and left the door open to more stimulus in the months ahead, contrasting the Fed’s higher rate outlook.
Key sterling drivers loom this week in U.K. inflation on Tuesday, and Thursday when the BOE meets and local data come due on retail spending.
"Higher U.K. inflation would tend to be pound-positive as it could limit the leeway for the BOE to act," says Joe Manimbo at Western Union.