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The Trend of the Day- EUR/GBP

The Trend of the Day- EUR/GBP

Gregory McLeod, Currency Analyst

After starting a stellar climb of from the .8500 area beginning in August of '09 and capping it all off 1100 pips later at .9410, the EUR/GBP has finished out 2009 in a less than exciting fashion. Stuck in a range between .8830 and .9149, EUR/GBP hardly inspires trend traders. However, what the pair is not doing is of significance; it has not broken below its 200 moving average. The 200 MA is an important moving average watched by many traders. When a currency pair is trading above its 200 MA it gives the pair a Bullish bias. If a pair is trading below its 200 MA its a Bearish bias. Though this pair is ranging, there is an upward slant to this range which favors a long trade. Ideally, we would look to buy at or near the bottom of the range (.8830 level) which is where the 200 MA is located. We would place a stop 15-20 pips below that to give this trade room to breath. An alternative entry would be to enter on a 2-pip break above the December 30th high of .9053. I would look for EUR/GBP to get back to at least the .9200 area. Though the Eurozone is having its problems with member countries like Ireland and Greece, it is in better shape than the UK economy that is plagued by fiscal deficits and low growth. This is the fundamental backdrop to our technical entry.

EURGBP 1.06.2010

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.