Euro / British Pound Cross Targets Parity

Momentum seems to be in ample supply for the EURGBP’s advance. Though liquidity is still very thin for the market as a whole, both the euro and pound have maintained high levels of volatility. Combined, the pound’s steady decline to multi-year lows across the market and steady euro bidding has led this pair to set another (albeit tentative) record high. Today’s bar may read like a double top on the shortest time frames, but the bigger picture is still aiming for the psychologically significant parity milestone. While this may act as significant resistance, it will also be a magnate for market.





The EURCHF’s reversal has been rather pervasive. In fact, over the past 10 active trading days, only one session closed in the green - a testament to support read around 1.5000. Monday’s sharp sell off broke this notable hurdle with an a massive 300-point range bar (especially significant since liquidity is light). The rebound today is likely standing in as a test of former support and an acknowledgement that in such thin markets, momentum will be hard won. The pull back could maintain its balance barring any unusual ripples in volatility; and a modest pivot at 1.4750 stands as a modest barrier to retesting the late October swing low.





Short-term congestion (and a notable double-top) is meeting the momentum behind a very steady bullish trend for EURCAD. This pair has frequented new highs often this month, but the stability seen in the majors has been reflected in this euro cross. With little depth in this market, there is a high probability that our prevailing technical levels will hold; however, volatility is extremely high. In fact, the past two sessions have both seen 500-point ranges where both support and resistance were tested and rebuffed. This suggests that the pressure for a breakout is high, but the tall upper wicks on the past two weeks’ daily candles suggests we may not necessarily see another break higher.





The ascending wedge pattern that EURAUD began developing back in October and November has grown to be far more aggressive that initially expected. However, in the past few weeks, volatility has died down and left this pair in an otherwise tight 200-400 point range (modest considering the swings from just a month or two ago). At this point, a breakout from this congestion pattern is a low probability within the span of a week. However, this pattern will continue to unfold with time. Momentum says another leg of this extended bull wave is likely with a confirmed push above 2.1000. This pressure – and the overall scenario – would by negated with a reversal that drops below 1.99.





The kiwi has seen a rebound in strength recently; and the euro’s pull back from new highs across its more liquid pairings has left EURNZD to congestion. However, looking at an increasingly lower frequency chart reversals range conditions are most likely temporary. On an intraday time frame, congestion has built up between 2.4675 and 2.4100. Looking back at the daily chart though, a trend channel emerges from the surge in momentum seen through November. Any further out, and we get a real sense for momentum behind this pair. So, while we may have to wait until next week for a genuine breakout, there will nonetheless be a major push (trend continuation or even sharper reversal) in the near future.



Questions? Comments? Send them to John at jkicklighter@dailyfx.com.