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EUR/GBP Risks Larger Rebound on Failed Test of March Low

EUR/GBP Risks Larger Rebound on Failed Test of March Low

David Song, Strategist

EUR/GBP

EUR/GBP Risks Larger Rebound on Failed Test of March Low

Chart - Created Using FXCM Marketscope 2.0

EUR/GBP slipped to a low of 0.7054 in May following the break/close below 0.7120 (100% expansion) to (0.7150 (23.6% retracement), but the failure to test the March low (0.7013) may produce a near-term correction in the exchange rate.

Increased efforts to prevent a Greek default/exit may foster a relief bounce in the single-currency, and positive headlines coming out of the monetary union may prop up the euro-pound in the days ahead amid the uncertainties surrounding the U.K. fiscal outlook. Nevertheless, policy divergence between the ECB & BoE continues to cast a long-term bearish outlook for EUR/GBP, and a near-term correction may offer better entry prices to play the downward trend in the exchange rate.

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