Euro Versus British Pound – Is This Trend Change? (18th September 2016)

Euro after trading below 0.8400 versus the British Pound started to recover. Can EUR/GBP pair continue to move higher going forward?

Euro Versus British Pound – Is This Trend Change?

·       Euro recently recovered well after tumbling below the 0.8400 support area against the British Pound.

·       The EUR/GBP pair traded as low as 0.8333 where it got support and started recovering.

·       During the upside move, the EUR/GBP pair also broke a couple of important barriers.

EUR/GBP Technical Analysis

The Euro was in a downtrend against the British Pound until it found buyers near 0.8330. Before finding buyers, the EUR/GBP pair was under a lot of bearish pressure. However, it is now under a recovery mode, and showing a lot of positive signs.

During the recent recovery mode, the EUR/GBP pair broke a monster bearish trend line formed on the 4-hours chart, which may result in more gains.

Euro versus British Pound EURGBP 18sept16

The EUR/GBP pair is now above the 100 simple moving average on the H4 chart. Moreover, it is also above the 38.2% Fib retracement level of the last drop from the 0.8724 high to 0.8330 low. So, more upsides are possible in the near term in the Euro.

Trade Idea – Buying dips can be considered as long as the EUR/GBP pair is above the 0.8420 support area.

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Fundamental Analysis

This week, both the Euro Zone and the UK saw a couple of critical economic releases. The main one in the Euro Zone was the CPI. The market was expecting the Euro Zone CPI to increase by a small margin of 0.1% in August 2016.

The result was also as forecasted, which helped the Euro in gaining some ground. The report added that the “largest upward impacts to euro area annual inflation came from restaurants & cafés (+0.10 percentage points), fruit and vegetables (both +0.07pp), while fuels for transport (-0.35pp), heating oil and gas (both -0.12 pp) had the biggest downward impacts“.

Overall, the report helped the shared currency in gaining bids against the US Dollar and the British Pound. If the current momentum stays with the Euro buyers, then there are chances of more upsides in the EUR/GBP pair in the near term.

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