technical analysis EURGBP

Technical analysis of EURGBP

The pound sterling has reached a two-month high against the euro today in the aftermath of the NFP amid positive sentiment on sterling, generally decent recent data from the UK and an improving economic outlook from the BoE. The UK’s removal of Portugal from its ‘green list’ and the poor outlook for European tourism in the immediate future have weighed somewhat on the common currency, while overall Germany’s economic recovery has been slower so far than that of the UK. This technical analysis of EURGBP looks at areas of possible importance on the daily chart.

High resistance is unclear. 90p, above the top of this chart, would be an obvious candidate, but the chances of this area being reached this month are very low barring an abrupt change in sentiment or the general impression from data. The zone of the latest low just below 85p is a clear possibility for low support, with a bounce looking likely from this area if reached in the near future.

Technical indicators on EURGBP D1


Moving averages give a sell signal, with the price below all three of the 50, 100 and 200 SMAs. However, the 50 SMA has recently golden crossed the 100. The main resistance from moving averages over the next week or so is likely to be the 100 SMA around 86.2p.

There is no signal for saturation from either Bollinger Bands (50, 0, 2) or the slow stochastic (15, 5, 5) at the time of writing. However, the latter at about 32 is slightly closer to selling saturation than neutral. Buying volume has generally been higher than selling over the last fortnight.

Price action and Fibonacci


A very slightly inclined downward channel appears to have formed starting in about the middle of April. This might make a clear breakout to the downside unlikely over the next few days. However, the current pattern of candlesticks looks like three black crows; while confirmation should be sought from the completion of the current period, this would be an important sell signal.

The primary technical reference from Fibonacci at the moment is the 61.8% weekly retracement area. Another failed test of this would probably drive a round of losses. Meanwhile price below the 38.2% zone of the weekly Fibo fan might be taken as a weak oversold signal.

Technical analysis of EURGBP: summary


The impression from TA overall for euro-pound is somewhat negative, but volumes and the golden cross of the 50 and 100 SMAs might suggest that more strong losses here are unfavourable in the near future. ZEW sentiment and German balance of trade on Tuesday and Wednesday next week respectively might make the near-term direction on the chart somewhat clearer.

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