Last Wednesday’s bullish engulfing candle for the $uros to poundsr was duly confirmed in subsequent trading towards the end of the week, with both Thursday and Friday ending the trading sessions higher as the pair breached both the 9 day and 14 day moving averages once again, suggesting that the recent decline on the daily chart may be coming to an end. However, before we assume that this is the start of a strong trend reversal, there are several key technical levels that need to be breached for a full blown recovery. First we need to see a break and hold above the potential strong resistance level now in place firstly above the 0.9070 region with a breach of the 40 day moving average, and then towards the top of the recent reversal at 0.937, with the first of these now currently being tested. Should we see a break and hold above this level then we should see the pair push higher in due course to test the second level as outlined above, but any failure in the 0.90 price region will signal weakness in the move and a possible pullback as a result.

Items of $undamental news the Euro and Sterling today include the German Ifo Business Climate survey, a highly respected data set given its large sample size (approx 7000 businesses are polled) and historic correlation with both German wider Eurozone economic conditions.  the Ifo is considered a leading economic indicator as businesses tend to react quickly to market conditions and any change in sentiment can give the wider market an important early signal.  The forecast number is 92.6, a marginal improvement from previous.   Meanwhile in the UK traders will be watching the Inflation Report Hearings at which the BOE Governor & MPC members are expected to testify on inflation and the economic outlook before the Parliamentary Treasury Committee.  Expect volatility especially following any direct comments about the currency markets.

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