EUR/GBP is a mover on the session thanks to the latest ECB statement, but the action may not stop there with the latest business sentiment numbers from Europe coming soon.
EUR/GBP Resistance to Hold?
On the four hour chart above of EUR/GBP, we can see sideways trading behavior on the pair going back to the end of February, with strong resistance around the 0.8700 handle and support starting around 0.8550.
And today, the market shot up as the euro broadly strengthened against the majors, likely a reaction to the latest monetary policy statement from the European Central Bank earlier in the U.S session. The statement was viewed as hawkish with rhetoric of hope that the ECB may be able to unwind its stimulus program starting near the end of 2021, rather than in 2022 as previously expected.
That brought the market up to the top of the previously mentioned range, and volatility may stay elevated into the weekend as we’ll get more top tier data on Friday. Tomorrow, we’ll get the latest monthly flash PMI readings from both the Euro area and the U.K., with expectations that the Euro area numbers to take a dip further into net contractionary conditions, while the U.K. sentiment is expected to recover further in an expansionary environment. If this scenario plays out, we could possibly see a reversal of today’s pop higher, and a swing move back to the bottom of the range.
Of course, if we get a surprise scenario of the complete opposite (i.e. improving Euro area sentiment while U.K. sentiment dips), the current retest of the major resistance area around 0.8700 may draw in a bullish market reaction, and a break-and-retest scenario for a long position is the ideal play to potentially consider for a swing trade.
So, we’re watching those events for a potential swing setup in EUR/GBP? Which way are you leaning on the pair: Breakout or fakeout? Let me know in the comments section below!
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