Yesterday’s candle on the daily chart for the euros to pounds currency pair, closed the day with an up bar, but with a deep lower wick on the body of the candle, suggesting that we may see a temporary reversal in the bearish tone, and indeed this has followed through into today’s trading session with a break above both the 9 day and 14 day moving averages, and approaching a test of the strong support in the 0.88 price area. The main reason for this reversal in sentiment is as a result of the UK Pound’s pullback following the recovery of he US dollar against a basket of major currencies, and coupled with fundamental news items both in the UK and Europe. Many market commentators and analysts believe that sterling is overbought against the US dollar, and in today’s trading session has been subject to concerted selling pressure throughout the day, with the euro benefiting as a result. Whether this trend continues in the euro pound pair, only time will tell, and for any reversal to be confirmed we will need to see prices break and hold above the 0.90 price region once again. With all three moving averages pointing lower, this seems unlikely at present, and the reversal may only be temporary as the market takes a breather from the long slow decline of the last two months.

The fundamental news for today was dominated by interest rate decisions, both in the UK and Europe, with both central banks deciding to keep rates on hold as expected, the former at 0.5% and the latter at 1%. The only other significant item of economic news came in the UK, with the release of the Halifax HPI data, which came out better than expected at 2.6% against a forecast of -1.0% – an encouraging signal, but hardly one to suggest that the housing market in the UK has turned a corner. Indeed during the deep UK recession of the early 90′s these ‘blips’ occurred regularly and failed to provide any clear signals until after the event!

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