Yesterday’s wide spread up bar added considerable momentum to the short term reversal for the $uros to poundsr, raising the possibility that this could be more significant than simply a short squeeze before turning lower once again, with the price action during the trading session breaking and holding above both the 9 day and the 14 day moving averages. However, the high of the day failed to make any significant progress in breaching the strong resistance now directly above, and the key to any reversal higher will be whether this area can be breached, or simply provides an impenetrable barrier to the any further progress. Indeed today’s price action would tend to confirm this view, with the high of the session bouncing off the 40 day moving average and suggesting that the move may be only temporary. The key for any sustained move higher will be if the price can break through the current resistance and hold above the 0.90 – 0.91 region – if so then we could see a recovery in the euro vs pound, and if not, then the decline may well continue into the summer months with a much deeper move lower, possibly as far as the strong resistance level in place at 0.80. I will look at the weekly chart on Monday as this is forming an interesting candle which could well provide us with a longer term view as to the future direction of the euros to pounds pair in the short to medium term.

The only news on the economic calendar for today for the euro or the pound was in the UK with the release of the PPI data, of which the input numbers came in worse than expected at 0.4% vs a forecast of 0.8%, whilst the output numbers were on target at 0.4%.

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