EURGBP has been moving sideways on the 4-hour chart, just coming off a test of the range resistance near .7900. The top of the range held as resistance as expected, putting price back on track towards testing support at .7700.
Stochastic is on the move down to show that sellers are in control, but the oscillator is already dipping into the oversold region. This means that bearish pressure could fade soon and allow buyers to take over. RSI is also heading south but appears to be turning higher.
Meanwhile, the 100 SMA is still above the longer-term 200 SMA so the path of least resistance is to the upside. If buyers are eager to hop in, the middle of this range at .7800 could already hold as support and trigger another test of resistance or even a break higher.
In that case, EURGBP could rally by an additional 200 pips or the same height as the rectangle pattern. Similarly, a break below support could lead to a selloff of roughly 200 pips, taking price down to .7500.
The BOE decided to keep policy unchanged as expected, sharing a bit of optimism that government fiscal policies could help keep the economy supported. Brexit concerns have been raised and these are factors keeping the central bank from adjusting policy for now.
As for the euro, the ECB unveiled a number of rate cuts and an expansion of their easing program last week. Still, the euro drew support from Draghi’s remarks suggesting that they won’t be cutting rates again anytime soon. Also, the euro zone core CPI enjoyed an upgrade from 0.7% to 0.8%.
No other reports are up for release from the euro zone and the UK today, suggesting that the range could stay intact unless there are any additional directional catalysts.
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