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It looks like the rising channel on EUR/GBP is still intact and the pair might have a shot at testing support. Here’s what I’m watching.

Long EUR/GBP Idea

In my Weekly FX Crosses Watch, I showed y’all how the pair has been testing the rising channel resistance at the .9000 area, and it looks like this might be strong enough to keep gains in check for the time being.

Applying the Fib tool on the latest swing low and high shows that the 61.8% level lines up with an area of interest. This is also close to the channel support and the .8850 minor psychological support.

EUR/GBP 4-hour Forex Chart
EUR/GBP 4-hour Forex Chart

So far this week, the lack of negative updates from the U.K. economy has kept sterling afloat. The U.K. Q2 preliminary GDP reading even came in line with estimates of 0.3% growth, higher than the earlier 0.2% uptick.

As for the euro zone, the weaker-than-expected PMI readings from Germany and France earlier this week cast doubts on ECB tapering expectations. Weaker than expected import prices in Germany also suggested slow inflationary pressures but a couple of business climate indicators (German Ifo and Belgium NBB) did hint at positive prospects.

Based on central bank biases, I think the ECB might be on track to reduce asset purchases before the BOE can hike interest rates. After all, the U.K. still has to worry about Brexit repercussions and the central bank might want to keep some stimulus in place for that.

With that, I’m considering taking a long position on this pair at the .8850 support, with a stop below the swing low and a target at .9000. Price still has a long way to go before reaching my ideal buy zone, though, so I’ll try stay patient for now. What do you guys think?

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