EURGBP forex technical analysis
As EUR/GBP looks to put in some distance from 0.7200, how far can we expect the pair to fall if the slide continues?
Nothing goes in one direction forever and although we're not really in a position to think about buying the euro right now, we should be thinking a bit further out in the future.
The break below the 0.7370/80 level, and then the 61.8 fib at 0.7255 opened the trapdoor for this current move. Of course, the euro has been weak all over the place but the big levels breaking have been a good indication of divergences between countries.
EURGBP monthly chart
The next biggish level is around 0.7100/20, which was a fairly strong multi year resistance point going back to 2003/2004. The break up in 2007 saw the level become a support point on the monthly chart. It's a sizeable level to watch.
There's a whole 5 year range area to watch with the bottom at 0.6533/50. It we break into that range it could well be the point at which we see some consolidation.
With QE on the go we're going to need a good 6 months to see the effects filtering through to the economy. That's going to be putting the Fed and the BOE front and centre in the USD and GBP side of the trade. I've already highlighted what could happen with flows out of Europe on QE, and the UK stands to be one of the beneficiaries, which will keep the pressure on the downside.
Once the UK and US start raising, and indicate a path for rates, that may well be the time to look at how Europe is doing and whether it's time to start looking at euro longs for a longer term trade.