EUR/GBP forecast for the week of April 17, 2017, Technical Analysis
The EUR/GBP pair has been relatively choppy for months. However, we are testing the bottom of a symmetric triangle that could send this market lower. On a move below the 0.84 handle, I believe that the market will start to fall apart and perhaps longer-term reach all the way down to the 0.76 handle. Obviously, there are several areas between here and there that could offer support, especially near the 0.80 handle, which of course is a large, round, psychologically significant level. I also believe that the 0.82 level will be important as well.
The idea behind this is that there are a lot of questions about the European Union, while at the same time we are starting to see significant inflationary pressure in the British economy. It’s possible that the Bank of England will have to tighten rates much sooner than originally anticipated, and that should send this market lower with speed.
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Ultimately, we could see some type of supportive candle or a bounce from this uptrend line to keep the market in the triangle. However, as a rule triangles need to break somewhere before the 75% completion area to be reliable. Therefore, I think this week might be interesting for this pair. If we rally from here, we will have to break out rather soon or that would make the triangle all but nonexistent at that point in time, and that would be a sign that we will continue to consolidate and grind sideways as the world awaits the results of the British leaving the European Union. Also, there are a lot of elections in the European Union now that have people concerned, although some of those fears have subsided.
With this being the case, expect a lot of volatility but I believe that we are coming close to an inflection point in this pair, and by extension a very strong move in one direction or the other. This market has been so quiet lately that many of you probably have ignored it, but we are getting close to a move from what I can see.