EURGBP has been trending lower recently but has just bounced off a descending channel that’s forming on its 4-hour time frame. This could offer a pullback opportunity to the top of the channel near the dynamic resistance at the moving averages.
The 100 SMA is below the 200 SMA so the downtrend is likely to carry on. Applying the Fib tool on the latest swing high and low shows that the 50% level lines up with the channel resistance around .7750. If this holds as resistance, the pair could resume its drop to the previous lows at .7570 or much lower.
Stochastic is already in the overbought zone but hasn’t turned lower so there may be some buying pressure left to complete the pullback. RSI is also in the overbought area but has yet to turn down to indicate a return in selling momentum.
Brexit online and telephone polls conducted by The Guardian suggested that public opinion may be shifting in favor of leaving the EU, triggering a sharp selloff for the pound. If the UK leaves the EU, additional economic and financial uncertainty could be seen, possibly shaving off a chunk of the economy’s growth and hurting employment.
Meanwhile, data from the euro zone came in mixed. German retail sales fell 0.9% instead of showing the projected 1.0% gain but unemployment fell by 11K versus the projected 4K drop. French preliminary CPI beat expectations with a 0.4% increase while euro zone flash CPI estimates came in line with expectations of a 0.1% decline in the headline figure and a 0.8% increase for the core figure.
Up ahead, UK manufacturing PMI is up for release and a rise from 49.2 to 49.6 is eyed. although Brexit updates could have a stronger say in price action. Final manufacturing PMI readings are lined up from the top euro zone economies as well.
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Kate has been a technical analysis covering forex for many years. She our daily forex outlook and works in the New York office of Forex.Today