EURGBP has found support at the .7700 major psychological level and is making its way up to test the resistance at .7900. If the top of the range holds, another move towards the bottom of the range might be seen.
The 100 SMA is above the 200 SMA so the path of least resistance is to the upside. This suggests that an upward breakout might take place, possibly taking EURGBP up by 200 pips or the same height as the chart formation.
However, RSI is pointing down to show that sellers are taking hold while stochastic is also making its way out of the overbought zone to suggest a return in bearish pressure. If selling momentum strengthens, a break below the range support might take place, pushing EURGBP lower by 200 pips to .7500.
Event risks for this trade today include the BOE statement and euro zone final CPI readings. BOE policymakers are expected to reiterate their downbeat outlook, reminding traders that they’re not likely to hike interest rates anytime soon given the weak inflation and slow economic activity in the UK. Brexit fears could also be addressed.
Earlier in the week, the UK printed a stronger than expected jobs report. The number of claimants dropped by 18K versus the projected 8.8K slide while the average earnings index rose from 1.9% to 2.1% to indicate stronger wage growth. The unemployment rate was unchanged at 5.1% as expected.
As for the euro, no revisions are expected for the final CPI readings, although downgrades could spur more euro declines. The ECB already lowered several interest rates and expanded their asset purchase program in order to stimulate growth and inflation, but the shared currency drew support from Draghi’s comments saying that they’re unlikely to lower rates again in the near-term.