EUR/GBP has sold off strongly in the past few weeks, bringing it down from the .8750 area to the .8400 handle. The 4-hour chart reveals that there’s strong support in this region though.

At the same time, stochastic is in the oversold area, suggesting that euro bulls could push the pair back up. Fundamentals, on the other hand, favor the pound and suggest that further euro weakness could be seen. After all the ECB statement hinted at an easing bias while the UK economy has been showing strong improvements.

A bounce from .8400 could take the pair back to the top of the range or at least the middle, around .8550. A long order with a 50-pip stop and a wide target would yield a decent reward-to-risk ratio.

By Kate Curtis from Trader’s Way