EURGBP Countertrend Setup (Nov 25, 2016)

EURGBP has been trending lower on its short-term time frames, moving inside a descending channel on the 1-hour chart. Price is currently testing the range support and might be due for a bounce back to the resistance around the .8560 levels.

The 100 SMA is below the longer-term 200 SMA so the path of least resistance is to the downside. In addition, these moving averages are around the middle of the channel so they might hold as near-term resistance.

Stochastic is heading up to show that buyers are in control of price action for now. Once the oscillator reaches the overbought zone and turns lower, sellers could regain control and push price back down, perhaps even spurring a break below support. 

Economic data from the euro zone has been mostly upbeat this week, with majority of the flash manufacturing and services PMIs coming in better than expected. German Ifo business climate data yesterday showed no change at 110.4 versus the estimated rise to 110.6.

As for the UK, the government’s Autumn Forecast Statement appears to have reassured businessmen and investors that fiscal support can keep the economy afloat during the Brexit. The Chancellor assured that they won’t be cutting pension benefits and that they’ll increase spending on infrastructure as well.

The UK second GDP estimate is up for release today and no change from the earlier 0.5% estimate is eyed. Preliminary business investment data is also up for release and a strong increase could boost confidence in the UK economy while a drop sharper than the expected 0.2% decline could mean losses for the pound.