Introduction

For sometime now, neither the bulls nor the bears have been able to maintain a complete control of the EUR/GBP. As a result, the pair has now formed a near-perfect horizontal channel pattern. Will it break out of this pattern?

Factors Affecting

The good performance of the euro is largely attributed to the recent rumors of action by the ECB to address the euro zone crisis. Unconfirmed reports circulated in the markets that German officials would support the ECB’s idea of implementing a bond purchase program that would efficiently cap yields from increasing further. This implies that it would make it cheaper for the affected countries to issue debt. On the other hand, the recently released U.K public sector net borrowing did not meet the expectation of the market, as it came in at 1.8 billion against the expected value of 2.7 billion.

Technical Analysis

As earlier mentioned, technical analysis on the EUR/GBP reveals it is trading in a horizontal channel pattern. If the pair manages to break out of this pattern to the upside, it may encounter resistance at 0.7950, before moving higher. On the other hand, if it starts trading downwards, it may encounter support at the bottom line of the pattern, at 0.7810.

Forecast

The best case scenario would be to wait for the pair to make some convincing moves either inside the pattern or out of the pattern before pulling the trigger. Otherwise, you may be caught on the wrong side of the game if you decide to enter now.

DISCLOSURE & DISCLAIMER: THE ABOVE IS FOR INFORMATIONAL PURPOSES ONLY AND NOT TO BE CONSTRUED AS SPECIFIC TRADING ADVICE. RESPONSIBILITY FOR TRADE DECISIONS IS SOLELY WITH THE READER.