EUR-GBP Setting up the Next Move

By: Mike Kulej

Last week the Euro-British Pound pair sold off dramatically. It fell about 365 pips, which is extreme, especially in the light of the most recent market activity. In fact, the plunge from 0.8646 to as low as 0.8281 created the largest weekly trading range in many months.

EUR-GBP 01-13-2011 Forex Technichal Analysis

What a difference this week, though. The EUR-GBP has spent the three days in a very narrow consolidation zone, which barely wider than 50 pips. Even by standards of this pair, that is extremely low volatility and lasting longer than it happens in most situations. This state of affair is unlikely to prevail for much longer.

On Thursday, both the Bank of England and the European Central Bank are scheduled to announce their respective interest decision. The chances are high that following these releases, the EUR-GBP will breakout out from the current congestion and find a new direction.

Because the preceding trend was bearish, statistics favor a new price swing to the downside. However, since the market is clearly waiting for important economic announcements, the statistics should take a back seat. Of interest are the resistance at 0.8340 and the support at 0.8280. Chances are that either one of them will give way on Thursday, pointing in the direction the next larger move in the EUR-GBP.