EURGBP seems to be starting a new uptrend, as a rising channel can be drawn on the pair’s 1-hour time frame. Price just bounced off the bottom of the range and might be headed back to the top.
However, stochastic is already indicating overbought conditions, which means that buyers are already exhausted and may allow sellers to take over. RSI is also nearing the overbought zone, suggesting that the buying momentum could fade soon.
In that case, another move back to the channel support might be seen. If selling pressure is strong enough, it could even trigger a break below the support at the .7050 minor psychological level. In addition, the 100 SMA is below the longer-term 200 SMA, suggesting that the path of least resistance is to the downside.
EURGBP FUndamental Factors
Event risks for this EURGBP trade include the release of the UK retail sales report today. This could show a 0.4% rebound from the previous 0.2% slide, possibly giving the pound a boost. Stronger than expected data might be a catalyst for a downside break of channel support while weaker than expected results could spur a move to the resistance at the .7200 major psychological mark.
Other potential catalysts include updates on the Greek bailout situation, although Germany already gave the thumbs up for the deal and could draw the IMF back on board. Recall that the institution required some form of debt relief before deciding to give more cash to Greece, and it seems that it could all work out within the week. Greece has to repay the ECB today and the lack of funds could mean more downside for the shared currency.
On the other hand, if all goes well for Greece, the euro could see further upside in the coming days as it would allow traders to focus on the improving fundamentals in the region.
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