EURGBP recently made a strong bounce off the bottom of its long-term range at the .7000 major psychological level and appears to have enough momentum to make it back to the top.

If resistance at the .7400 handle holds, price could head back down to the range support.

At the moment, EURGPB is still at the middle of its range while technical indicators are suggesting further upside. The 100 SMA is below the 200 SMA at the moment, but the short-term moving average looks ready to make an upward crossover.

Stochastic is on the move up, which suggests that buyers are still in control. However, this oscillator and the RSI are nearing the overbought area, indicating that selling pressure could resume soon.

Event risks for this setup include the BOE interest rate statement towards the end of the week. No actual policy changes are expected for now, but policymakers could reiterate their downbeat remarks from their previous announcement. 

The MPC minutes are up for release at the same time, and this should provide more insight on policymakers’ bias. If the vote to keep rates on hold turns out unanimous this time, the pound could see more selling pressure and possibly break past the EURGBP resistance.

As for the euro, a number of medium-tier reports are up for release but these aren’t likely to make a huge dent on the euro’s price action. Manufacturing production data from the UK was weaker than expected today, as it reflected a 0.4% decline instead of the projected 0.1% dip.

By Kate Curtis from Trader’s Way