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Pound / Euro: Is The Best Of The Rally Over?

Pound to Euro: (GBPEUR) Is The Best Of The Rally Over?

Before we take a charting look at the GBP v EUR, one of the better rules as far as the financial markets is concerned is that once the market in question gets into the national press (not just the financial press), the best of the move in question is likely to be over. While there is very often a slight delay ( a few weeks, to a couple of months), this is usually a good rule to follow.

It may be the case for instance, that the hysteria which accompanied Crude Oil heading below $50 is essentially the worst this commodity will see. If this is the case it would be equal and opposite to the way that the “parabolic” bull run for Gold going into 2011 ending in tears, and until now has still wrong footed those buying the dip.

 

GBPEUR

 

Interestingly enough the recent new record high for the FTSE 100 did not really capture the imagination of the press as much as the soaring price of the Pound sterling versus the Euro (GBPEUR). This is presumably for a couple of reasons. The first is that we are of course in the run up to the General Election and the Euro / EU and the Grexit issue are very much in the limelight at the moment. The second is that the Pound has a populist aspect to it, both in terms of how much holiday spending money we may have, but also whether it is worth snapping up a bargain on The Riviera or the Costa Del Sol. In other words, it makes for easy journalistic copy? A good example of this was in The Telegraph where a panel of “experts” were asked whether it is better change your money into Euros now or after the General Election on May 7? The correct answer on a practical basis is that it is probably best to change half now and half next month.

 

GBP/EUR Technical View

On a technical basis the answer is perhaps a little different as we are attempting to stick our necks out via the daily chart pattern of the past years GBP/EUR pairing. The overall perspective here is that this cross is in a rising trend channel from November, with the resistance line projection target as high as €1.45 implied over the next 2-3 months. But before Sterling bulls sing victory it may be noting a couple of points. The first is the way that the end of March delivered a significantly lower high versus the €1.42 plus peak to start the month. The second point to note is that since the high was made the 20 day moving average now at €1.3792 has capped the price action. The implication is that if you are cautious of this market you may wish to wait on a clearance of this feature before targeting €1.45. This is because unless or until the 20 day line is cracked there is the risk of a retracement back towards the floor of the November channel at €1.33, even if the big rally for the Pound continues again after that.