EUR-GBP – What is Next?

By: Mike Kulej
During the recent sell off, the British Pound did not fare much better than the Euro. The Pound fell over a thousand pips against the US Dollar in about a month. Over the last two weeks, both of these currencies were moving almost in step. This is reflected in a cross rate between them, the EUR-GBP. Here the price created a trading range, and has been oscillating within it. The intermediate term chart clearly shows a rectangle-like pattern, contained within 0.8620-0.8490 price band. Current trendless condition is confirmed by a neutral reading of MACD, as well as the Standard Deviation Indicator. Under most circumstances, a situation like this does not last very long, and eventually the price makes a move outside the boundaries of consolidation. A breakout takes place. In case of the EUR-GBP, this could be expected fairly soon, given that both the Euro and the Pound rebounded to some degree from their lows against the Dollar. They should start moving more independently, which, in turn, would push the rate of EUR-GBP out of the rectangle. Judging by vertical spread of the pattern, the next price swing could be as big as 100 pips, nice move for a currency pair with such a high pip value.