Euro traders can often miss out on some great trades in the cross pairs, and none more so than in the eurgbp which over the last few weeks has been powered higher by the twin effects of hugely positive sentiment towards the euro, and equally, deep negative sentiment towards UK Sterling.
The net result of this twin effect is that on the weekly chart for the eurgbp we have had three consecutive weeks of solid gains all characterised by wide spread up candles with the potential for a fourth candle this week.
As such, the pair has surged higher from the 0.8150 area to trade at time of writing at 0.8593, as the eurgbp tests the psychological 0.86 price point.
In the course of this bullish trend higher the pair has broken out from the sustained consolidation phase of 2012, and in addition has breached a key resistance band sitting in the 0.8300 to 0.8450 price range. This now, of course, offers the eurgbp a solid platform of support for the next leg up. This next leg up for the eugbp is, however, going to require some additional momentum if it is going to continue its current bullish trend and move towards the psychological 0.90 price point.
And the reason is that the eurgbp is now approaching a deep and broad area of price congestion which lies immediately ahead and extends from the 0.8600 level through to 0.8841 which was created over a period of several months in 2011.
For the pair to attack the 0.90 level the eurgbp we will need to see a firm break and hold beyond this deep band of price congestion.
Finally, this week’s price action has also seen the eurgbp break through the iconic 200 week ma adding further positive sentiment to the pair.
By Anna Coulling