EURGBP has enjoyed a strong rally of late, adding nearly two cents after trading at a low of 0.8490 on May 5. This strong rally may find further upside difficult as it nears robust resistance levels at 0.8718 – 38.2% Fibonacci retracement – followed by 0.87233 – March 21 ‘spike’ high – and 0.87650, the 200-day moving average which has capped the pair since mid-January.
Another indicator – CCI – shows EURGBP in overbought territory but just starting to level off, and this may also weigh on any further upside momentum in the near-term. We noted on April 24 that EURGBP was in overbought territory using CCI just before the sell-off down to 0.8490.
The battle for dominance between the two currencies continues with the EUR suffering from a weak EZ economic backdrop, and a German Bond curve showing negative yields out to 10-years, while GBP has to suffer continued Brexit uncertainty. GBP does have the slight economic advantage with a tight jobs market nudging hawkish BOE policy thoughts, while recent GDP data shows the UK economy expanding faster than the Euro-Zone.
EURGBP Levels to Note: Current Spot Price – 0.8680
To the upside – 0.87180, 0.87233 and 0.87650.
To the downside – 0.86355, 0.86240 and 0.85910.
EURGBP Daily Price Chart (September 2018 – May 15, 2019)
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