EUR/GBP Forex Signal: Euro Recovers Against Pound

Potential signal

• If we can get a daily close above the 0.8520 level, I am a buyer.
• At that point, I would have a stop loss at the 0.8450 level, with initial target of 0.86 level, perhaps even only taking half profit there.

In my daily EUR/GBP analysis, I can see that the euro has initially fallen during the early hours on Thursday only to turn around and show signs of life again. This asset of course is going to be very noisy, as we are going through United Kingdom parliamentary elections, and at the same time there are a lot of questions asked about the European Union and its economy.

Just above, I see the 50-Day exponential moving average (EMA) offered a significant amount of technical resistance, especially as it is sitting at the 0.85 level that is a level that obviously is a large, round, psychologically significant figure, and an area that has been important multiple times in the past. If we can break above that level, then it’s likely that we could go looking to the 200-Day EMA, near the 0.8560 region. Anything above there could send the EUR/GBP market toward the 0.86 level, which is also a large, round, psychologically significant figure.

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Downtrend

This is a market that still has been in a major downtrend, and we need to look at this through the prism of whether or not that continues to be the case. After all, we have just hit a major support level from the longer-term charts. This area has been important multiple times in the past, so I do think that we have a situation where buyers could bounce from there. The 0.84 level represents a major low going back several months, if not years, and therefore to recover from here does make a certain amount of sense.

That being said, the market continues to see the interest rate differential work against the euro, but it’s not massive at this point, and although the European Central Bank has cut interest rates, I think you still have a proclivity to bounce from here, as the market is likely to continue to see buyers willing to take advantage of “cheap euros.” Furthermore, a lot of people are going to have to look at the possibility that the Bank of England may have to cut rates down the road as well, so with all of that being said I think this is a situation where we probably continue to see the euro at least fight.

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