Momentum Shifts - Euro to Pound Exchange Rate May Have Passed its Low-Point

Interest in chasing the euro higher against the British pound is growing says analyst Yann Quelann at Swissquote Research after the shared currency enjoyed 8 uninterupted weeks of ascent.

Euro to pound sterling exchange rates

Sterling fell further on Friday amidst renewed risk aversion, and a growing belief there is no chance of a UK interest rate hike in 2016.

After falling through key support levels earlier in the week, sterling fell to a five-and-a-half month low against the US dollar and a twelve-month low against the euro on Friday.

Will the moves against the dollar and euro continue? Yes argues analysts Yann Quelenn at Swissquote Bank.

Quelann says he sees the potential for a longer-term shift in momentum in the pair.

The euro to pound sterling exchange rate has been in decline since 2008 when it peaked at 0.9802.

history of the euro to pound sterling

“EUR/GBP is increasing. The technical structure suggests that there are strong buying interests. Hourly resistance lies 0.7694 (intraday high) and hourly support is given at 0.7350 (25/12/2015 low). Expected to further consolidate before entering into another upside move,” says Quelenn.

In the long-term, prices tend to reverse from the underlying declining trend.

“The general oversold conditions suggest a growing upside momentum. A key resistance at 0.7592 (03/02/2015) has been broken,” says Quelenn.

Pound to Dollar’s Incredible Decline

While the GBP may be advancing against the under-pressure commodity currencies, such as the Australian dollar, it appears traffic is one way against the euro and US dollar.

“Another significantly bearish candle on Friday was seen as Cable continues its incredible decline. The RSI is now at its lowest level (below 20) than at any time since September 2014 (just prior to the Scottish Independence referendum),” writes Richard Perry at Hantec Markets.

The other main factor in this chart is that the key 2010 support at $1.4230 is now ready to be tested.

“The trouble is that the price is now accelerating away from the downtrend and becoming increasingly stretched, and just like an elastic band, stretched prices tend to have a snap back. For now we must stick with the sell-off as it is fairly uniform and well defined,” says Perry.

Perry says we must watch the hourly indicators for signs of a snap back or technical rally.

“As yet there is nothing but watch the hourly RSI moving above 60 and the MACD moving above neutral, to act as early signs. There is further resistance at $1.4450. Below $1.4230 then the next level is $1.4000,” says the analyst.