Euro Cross Pick 03.31.2011
As the EUR/GBP breaks out of the downward trend from the end of 2008, the rebound from January may gather pace going forward, and the pair may continue to retrace the decline from the previous year as interest rate expectations prop up the single-currency. As the Bank of England maintains a neutral outlook for monetary policy, the euro-pound looks as though it will trend higher in April, and the pair may work its way back towards the 50.0% Fibonacci retracement from 2008 high to the 2010 low around 0.8920-40 as it advances to a fresh yearly high of 0.8852 on Thursday. However, as the relative strength index approaches overbought territory, we should see a small correction in the days ahead, and I may look to buy the EUR/GBP if we see the pair find support around 0.8720-40, the 38.2% Fib. As the European Central Bank is widely expected to lift the benchmark interest rate off the record-low next week, I will look for a possible trade setup on Monday, and will look for a test of the 50.0% Fib as the pair trades within a broad upward trending channel.
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