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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A week of sideways price action for the $uros to poundsr, with the 0.89 price level now seeming to provide a platform of potential support, with the end of the week failing to confirm the bearish engulfing signal of Wednesday, with the above level offering support to prices on both Thursday and Friday. However, whilst we remain below all three moving averages, technically the picture remains bearish, and should this platform be confirmed, then we will need to see several factors combine in order for the bullish momentum to be confirmed once again. Firstly ofcourse we need to see a break and hold above initially above the 0.91 price level, followed by a move above the 0.935 level in due course. Secondly, and as a result, we should see move above all three moving averages once again, and if these two factors combine, then we can assume that the bullish sentiment has returned to the euros to pounds pair, and if so, then the reversal of the last few weeks will be seen in the context of a longer term rally higher.

Support & Resistance Pound Euro:

S1:  0.8907     R1:  0.8965

S2:  0.8878     R2:  0.8994

S3:  0.8849     R3:  0.9023

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The $uros to poundsr was another of the currency pairs which saw a significant and substantial price movement on Friday as the currency markets reacted to the shocking GDP data from the UK, which came in at -0.4% against a forecast of 0.2%. Indeed the numbers were so bad, that many market analysts are now suggesting that the Bank of England may well have to review its quantitative easing programme which seems to be having little effect at present, and with Captain Brown in charge of a sinking ship which is fast disappearing beneath the waves as the band plays on, there seems little hope for the UK economy either in the short term or indeed into next year! The euro of course was a major beneficiary, with the euros to pounds pair racing higher as a result, and breaching all three moving averages as a result, and with the 40 day moving average providing solid support from below. With the recent short term decline now firmly reversed, the key for the medium term will once again be whether we see a break and hold above the recent top at 0.94, and should this price level be achieved, then a move towards unity once again becomes a reality for the euros to pounds pair.

There are no meaningful items of $undamental newsthe economic calendar for either the Euro or Sterling save for the German Gfk German Consumer Climate number which came in at 4.0 against a forecast of 4.5.  Later today there is also speech from External BOE MPC Member Designate Adam Posen at the Cass Business School in London. You can keep up to date with all the latest fundamental news on the economic calendar, latest currency news and live currency charts by simply following the links.  I have also included details on an excellent ECN broker.