A curious start to the New Year for the $uros to poundsrong> pair, which seems to have found some traction from the 0.8850 price level, with Monday’s wide spread up candle providing the basis for a strong recovery in the currency pair from the sideways consolidation of the last few weeks of 2009. However, whilst the euro pound bulls are no doubt delighted, this is far from a sustained longer term reversal higher, as technically we are still deeply embedded in the wide and deep price congestion of late 2009. With all three moving averages intertwined, there is little to suggest that a move higher is likely to be supported, and the only indication we have at present, is the strongly bullish signal of the deep lower wick in today’s currency market price action, suggesting that we should see a continuation of the move tomorrow. Beyond this, we need to see a break and hold initially above the 0.9150 price level, followed by that at 0.9250 and ultimately the top of the last rally in the 0.9450 region, and should this be achieved then we may well see a further attempt to breach parity in due course. In the short term of course, the currency rally needs to continue, which now looks likely, and provided we do not see prices stall at the 0.91 price handle, then the moving averages should begin to provide strong technical support once again as we look for a breakout above the recent consolidation zone on the daily chart.

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