Today, we had the Bank of England and European Central Bank release their latest statements on monetary policy. The ECB also held a highly monitored press conference. After all was said and done, the EUR/GBP is in a sharp rally. Let’s take a look at the reaction on the charts.
Today’s reaction was mainly based on the ECB. First of all, the BoE was snoozer, giving no new information on forward guidance. The market should maintain its current projection of a rate hike in the second half of 2015. The ECB also didn’t do much, but did say that it will reevaluate its current stimulus measures early 2015. This means, it is trying to avoid QE for now, but is keeping its options open. Meanwhile, it is still expanding its balance sheet – call it QE lite.
The EUR/GBP rallied sharply from 0.7840, and is poised to test a resistance cluster around 0.7940. If it holds below 0.7940-0.7950, there is still some bearish bias. A break above 0.7950 however suggests it is still in consolidation, and we should expect this to continue through December. This means, we should respect resistance around the 0.80-0.8050 resistance area, and also respect the 0.7765-0.78 support area.
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