EUR/GBP has been on an impressive run. While the rally stalled around the 200/233-day SMA band, it may not be over yet.
The pair was always likely to see significant resistance here, having done so in the past, but the important thing is what follows next.
The Bank of England and European Central Bank will announce their latest interest rate decisions on Wednesday, with the latter also providing new economic forecasts and, perhaps, some insight into what-if-anything will replace the PEPP program in March.
This will surely have a huge role to play on where the pair breaks next. With the pair pulling back, the key test below is 0.85, where the December lows coincide with the 50 fib level–November lows to December highs–and the 200/233-period SMA band on the 4-hour chart.
A move below could tip momentum back in favor of the sellers and see the pair resume its long-term downward trend. If this level holds, we could see another run at last week’s highs and, who knows, the pair could be heading into the new year on a much more bullish note.