Euro/Pound Looks For A Reversal

By Blackwell Global (Steven Knight)CurrenciesMay 12, 2015 04:31AM ET

www.investing.com/analysis/euro-pound-looks-for-a-reversal-251450

Euro/Pound Looks For A Reversal

By Blackwell Global (Steven Knight) | May 12, 2015 04:31AM ET

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The euro-pound has recently fallen strongly down to a low of 0.7138, mainly in response to the post UK election euphoria and perceived pound strength. Seemingly defying any fundamental or technical analysis, the pound has appreciated strongly against all contenders and subsequently caused large selloffs in base currencies. Despite this, the euro-pound has finally found some support and is now looking to climb out of its doldrums.

EUR/GBP 4-Hour Chart

The euro-pound appears to have found a bottom at 0.7138 and a Doji appears to be signalling a reversal to the long side. RSI is also starting to trend steadily north, out of oversold territory, signalling that a reversal of fortunes may be on the cards for the pair. The hourly charts show some definite buying activity with the 6SMA and 12SMA crossing whilst price starts to trend higher.

The first obstacle that the pair will need to surmount, to continue moving higher, is a resistance level at 0.7225 and 0.7260. A close above these levels may well signal a strong, bullish run, to the top of the current channel. However, any long-side push is going to face some significant risks, with Greece remaining top of the list.

Despite a slight improvement in the Greek debt negotiating positions, the risk of a Grexit still weighs heavily over the market. This is especially prescient considering that Germany has now started to suggest that a referendum should be undertaken by Greece over austerity. Any referendum over the matter is likely to turn into a vote over Greece’s future within the eurozone. This sort of uncertainty would likely cause great volatility within the euro-pound and put the potential for a strong retracement at risk.

Ultimately, reversal patterns can be hard to pick, especially considering some of the overarching risk factors that are at play in the eurozone. However, the charts are exhibiting some definite bias to the long side.

EUR/GBP Daily Chart

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