EUR/GBP Shows Strong Upward Momentum

By: Mike Kulej

Much to a surprise of many traders, the Euro has been very strong recently. It rallied against many other currencies, in many cases reaching important resistance levels, where next price swings will be decided. The EUR/GBP pair is at just such juncture.

On the intermediate term chart, this cross reached a high of 0.8390 in early September. This also happens to be where a minor high formed back in July, making this level an important resistance. A sell off to 0.8200 area took place next, followed by the current bullish run, which once again tested 0.8390. It was a fast recovery from a steep drop, indicating a strong upward momentum in EUR/GBP.

While it is very possible that some kind of short-term pull back/consolidation will take place now, another attempt at breaking the 0.8390 resistance is very likely. On this time frame, the EUR/GBP has a strong bullish bias – it remains above the main up trendline, as well as the 100 SMA. In addition, the 100 SMA is sloping north, always a positive sign.

Other technical indicators are also bullish. The MACD is well above the zero line, yet not oversold, while the Momentum indicator also has a strong positive reading. All this suggests that a breakout above the 0.8390 resistance could push the EUR/GBP higher still, perhaps to 0.8500.