Pound to Euro Recovery After Breakout Losses Momentum - More Downside Now On the Cards?
GBP/EUR is trading at 1.1744
The Pound has lost momentum and fallen back down after making a surprising recovery following a break-out from a rising channel.
The pair broke down below the lower channel line temporarily, reaching lows of 1.1682, before rotating and suddenly rising back up inside the channel it had just broken out of.
However, it has been unable to follow through higher and has recapitulated, falling back down to the lower channel line, and threatening the break lower.
The recovery appeared to be driven primarily by a recovery in the Euro ahead of key Eurozone CPI data out this morning at 10.00 (GMT).
The data could inform ECB policy at the next central bank meeting on December 7.
Market-watchers will also be looking to a speech by Mario Draghi at lunchtime for clues as to whether an extension of the current QE programme is likely, or a relaxation of the criteria guiding which assets the ECB can puschase.
UK Data Helped Pound
Strong consumer borrowing data, showing an unexpected rise in credit and mortgage lending in the UK was the main driver behind the rebound.
The data suggests fears the economy could be slowing down are unfounded as consumers continue borrowing and spending like Brexit never happened.
The uptrend remains bullish overall, with a break above the 1.1820 highs confirming a move up to the next target at 1.1900.
The rising channel could also be a trend reversal sign, like an ending diagonal pattern, which is from Elliot Wave Theory and occurs at the end of trends of one larger degree.
These are wedge-shaped patterns in which the component waves zig-zag to a narrowing apex before breaking strongly down.
It is therefore also still possible that a move below the 1.1677 lows would provide unequivocal confirmation of a clear breakout from the channel to a target at 1.1600.