Technical outlook: Pound to euro currency pair consolidates, will the recovery in pound to dollar hold?

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Published on Wednesday, 06 June 2012 11:23

Written by Sam Coventry

"This short term GBP recovery will be based on whether or not it is able to break the important 1.5606 – 1.5664 zone" - William Moore at RBS.

The pound to euro exchange rate is currently 0.31 pct higher on Tuesday's close at 1.2389. The pound dollar exchange rate is 0.75 pct higher at 1.5499.

As the above numbers suggest, the pound sterling is looking pretty good this morning.

But, what of the outlook? (Please note that the latest investment bank FX forecasts are published on our IMT site, access is free via this Facebook gateway).



According to William Moor, technical analyst at RBS, the pound euro currency pair could be in for a period of consolidation:
 
"This week and I think the market could be entering a period of consolidation after some of the erratic price action last week.

"There are overhead resistance levels at 0.8143 and 0.8192 as well at 0.8222 which I believe will cap and continued EUR squeeze higher.

"For now in the short term I have little short term call between the recent low at 0.7951 and the highs at 0.8192 and 0.8222."

The current risk-on environment that is characterising the markets today has seen the pound bounce back strongly against the US dollar.

But, from a technical point of view there are a few technical levels that must be cleared should the rally entrench itself.

Moore explains:

"This short term GBP recovery will be based on whether or not it is able to break the important 1.5606 – 1.5664 zone, this is an important retracement level from the recent sell off and the important recent low in March of this year.

"I also remember clearly that when this level was broken on the way down there were a number of stop losses triggered through there and the bearish trend really picked up pace on a very bearish day that opened near the highs and closed near the lows.

"Before then 1.5514 which is the 23.6% retracement is also worth noting. I struggle to see a good place for stop losses for a short term long trade here, the 5 day moving average is near today’s open at the 1.5400 figure, so makes sense in the short term."