EUR/GBP – Reasons to Rise

EUR/GBP is enjoying new European hopes and disappointing British events. It’s now close to an important line and it erases the big move it made. Here’s a quick update.

EUR/GBP now trades around 0.88, close to the 0.8840 resistance line. It already peaked twice at 0.8820. 0.8840 was broken a few weeks ago, and it was followed by a further plunge. Here’s why:European Hope

In Europe, long weeks of crisis in Greece are about to end. The EU Economic Summit will probably decide on a bailout program for Greece. This debt isn’t only Greek but affected other European countries and had an impact on the whole world.

EUR/USD already made its way above the important 1.3750 resistance line, but retreated. The situation of the Euro is much better now than last week, and it’s far enough from the bottom of 1.3580. It bounced off the lows.

British Trouble

In Britain, Mervyn King hurt the Pound again. In the quarterly BOE Inflation Report event he dismissed (again) the rising inflation and was very certain that it would meet the target.

The central bank’s quantitative easing program (aka pound pouring plan) ran out of money and it seemed that it wouldn’t be renewed. King said that the program might receive more cash.

Also the NIESR GDP estimate for Q4 was revised downwards to only 0.1% growth – quite weak. The estimate for the three months that ended in January was better, 0.4%, but after the revision, this is shaky.

A small revision of the official initial release for Q4 and Britain will see no end to recession.  All these figures weigh on the Pound. GBP/USD is very far from the pivotal 1.5720, and is looking to break down below 1.55. A more serious line appears at 1.5350.

EUR/GBP Technicals

Now that EUR/GBP is at an important resistance line, a line that was broken just a few weeks ago, it’ll be very interesting to watch.

Below, 87.70 is an important support line, and above 0.8920 will be a spot where a breakout will slow down.

The Euro and the Pound usually “trade together” against the US dollar. The recent weeks saw different behavior from both of them. It was interesting to see them switch their roles. The British Pound went from strength to weakness, and the Euro made the other way around.

An event to watch

There’s another important event coming up in Europe: the release of GDP. Traders will focus on the German GDP. This event is significant for two reasons: it’s the first country in the Euro-zone to release the initial GDP for Q4 (the other follow hours later), and the expectations for the German GDP are for a small rise of 0.1% in GDP.

Economists were too optimistic last time, and German growth was weaker than expected. This time, a disappointment means no growth, or even contraction. If the Euro-zone’s largest country will stop leading the zone, this means renewed trouble for the Euro.

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