Euro Pound (EUR/GBP) - Daily Candle Chart 2nd February 2009

Euro Pound (EUR/GBP) - Daily Candle Chart 2nd February 2009

Friday saw a wide down bar in prices for the euro pound currency pair, as the bearish momentum gathered pace, and it is interesting to note that the spreads of the last three days are increasing, suggesting that the move is genuine. In addition it is important to note that the support area at 0.8900 has now been breached by Friday’s price action and will now offer some resistance to a move back up. As always after such as steep fall of over 200 pips, expect some profit taking this morning so prices may rise today, but in the next few days, we should expect the move to continue with all three moving averages suggesting that prices prices will move lower, and that the poor old UK pound may start to strengthen. As I mentioned last week, my own view is that the euro is overbought at the moment, a view now confirmed by the charts.

The key figures for the UK pound have already been released this morningĀ  and are the manufacturing PMI index. As for the US and European data, this represents a survey of purchasing managers to gauge sentiment and future economic activity, and provides a snapshot of the real situation, hence the reason they are considered a leading indicator. The figures came in at 35.8 against a forecast of 34.4 and previous of 34.9, so slightly better than expected, but still showing an economy that is shrinking ( if any more evidence were needed). For the euro the $undamental news be found at the euro to dollar link. As this is the start of a new month, I will be looking at both the weekly and monthly charts later today to provide guidance and indications for our longer term trading.