Is it time for the next leg higher
The EURGBP declined from December to March. The move fell about 1000 pips in total which is a pretty big move. The correction in March, the price up toward the 38.2% retracement of the move down (see chart below). That level comes in at 0.7392. Seller reentered toward the end of March but buyers came in and we have seen a strong market after bottoming against the 38.2-50% correction zone on Tuesday (see yellow area in the chart below).
Next week should see some follow through buying.
ON the topside, the next target becomes the 38.2% retracement of the move down from the December high at the 0.7392 level. Above that the door opens up for a move toward topside trend line resistance at 0.7474 and the 50% retracement of the same move down at 0.7509.
Looking at hourly chart, the level that will define downside risk, will be the 0.7316- 0.7318 level. This is the 38.2% and near the 200 hour MA (green line in the chart below). I would expect that dips would be bought near this area. A move below, however, should solicit stops.
Fundamentally, the GBP should have a difficult time trading too high given the UK elections in May. Having said that Greece, Retail Sales, and Trade will all be released in the EU. Can the EU maneuver around that minefield and keep the short term bullish technicals in place? Stay above the aforementioned support,and the buyers remain in control.
