The Euro gained considerable strength against the Sterling it the UK market open as the Chartered Institute of Purchasing & Supply reported disappointing services industry data, but the day is from over in the pair.
Having hit fresh weekly highs at 0.8308 during Wednesday’s trading, the EURGBP ran into a spate of disappointing European data and a period of sustained decline. 0.8270 serve to temper the decline, and a small correction closed the day just shy of 0.8280. The downside momentum resumed on Thursday morning, with the pair falling to weekly lows at 0.8260 during the Asian session. Again, however, these lows offered up some resistance and the EURGBP corrected/consolidated into the UK services PMI release. The figure disappointed, reported at 57.6 versus a forecast of 58.1, sparking a sharp sterling selloff and a EURGBP recovery.
The surprise broke the pair through resistance at 0.8280, and it now sits just above that level at 0.8284. So what does the rest of the day hold? The current intraday technical bias is bullish. A solid close above Tuesday support at 0.8289 will offer up weekly highs at 0.8296 as an initial upside target.
Stochastics suggest overbought, as does the fact that price is trading outside the upper Bollinger, perhaps hinting at a short-term correction. In this scenario, look for aforementioned resistance at 0.8280 to offer up support.
Bear in mind however, that the ECB is set to reveal its latest rate decision at 12:45 GMT. If, as some expect, Draghi decides to cut the base rate, or the accompanying station has a dovish tone, the technical bias would reverse and traders would be targeting the downside in the EURGBP.
In this situation, the aforementioned break price at 0.8270 would serve as an initial downside target. Beyond that, look to lows at 0.8260.
All said, the pair looks to have found a medium term direction, but on such an important day for the future of the Eurozone, a medium term direction can easily be overcome.
To contact the reporter of this story; Samuel Rae at Samuel@forexminute.com