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Cable is selling off from the 1.44 level which coincides with the ceiling of the pair’s Jan 2016 falling channel. Bulls are unlikely to see a breakout above 1,4406, but if by some miracle that happens then 1.4575 / 1.46 present the next target. Above that we’ve got falling highs from Aug 2015 to look out for.
Far more likely, given current fundamentals (a UK economy in need of some triage / patching up and impending Brexit vote), is a pullback towards the 50-day MA 1.4274 with 1.4250 (the floor of the rising channel on the hourly chart) the next couple of support levels.
GBP/EUR is keeping up the pressure on its 50-day MA as the EUR finally starts to weaken a bit, following its weird reaction to a triple whammy of ECB stimulus measures announced last Thursday. We’d expect the stimulus package to leave the EUR relatively weaker than Sterling over the shorter term, at least until Brexit fear really starts to take hold, but note the two are subject to considerable pressure from above. Don’t be surprised at seeing little significant action in the pair this week.
Bulls will look for a breakout above the 50-day MA 1.295 and channel ceiling 1.298 to put recent highs 1.307 and early Feb levels 1.326 within reach. Bears, meanwhile, will be encouraged by the 5-month downtrend and attractive downside potential towards 1.275 and 1.261.
With 2016 rising support now re-gained on EUR weakness rather than USD strength, bulls are looking for Monday’s down move to indicate consolidation ahead of a breakout above May 2014 falling resistance and subsequent recovery towards 1.15. Keep an eye on what the markets are pricing in as regards Fed rate hikes on this one. Note the pair has been sideways through 2015/YTD while bears will be licking their lips as both the RSI and Stochastics have turned down, pushing the pair towards the lower part of the channel.
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