This week we will look at EURGBP, both technically and fundamentally.
On weekly chart EURGBP clearly broke out of trendline, this was part of triangle formed by two converging trendline. Price moved up and down several time within this triangle before breaking out to the top. Now, with the trendline broken price is looking to move higher.
EURGBP Daily chart (captured on Monday) shows price broke above and re-tested the trendline last Friday. Re-test of any trendline, support and resistance confirms the direction of the breakout and in this case it can’t get any better. Since the re-test price has already moved up and looking to head higher.
Last week, ECB President Jean-Claude Trichet made headlines after his hawkish comments signaled a likely rate rise in next month announcement. If that happens EUR is likely to gain significant strength since it has been quite a while since any major country has raised rates.
Later this week we have Bank rate announcement from GBP, keep an eye on that.
Look for longs on dips on shorter timeframe until 0.8670 area which is the next Resistance level. If price breaks this level then it is likely to move all the way up to 0.8920-30
If for some reason price is unable to move up and fall back below the trendline then it could signal further downtrend.