Key support lies below
The euro has been on an impressive run against the pound recently and as you’d expect, the rally stalled around the 200/233-day SMA band. But it may not be over yet.
The pair was always likely to see significant resistance here, having done so in the past, but the important thing is what follows next.
It’s worth noting that the Bank of England and European Central Bank will both announce their latest interest rate decisions on Wednesday, with the latter also providing new economic forecasts and perhaps some insight into what, if anything, will replace the PEPP program in March. This will surely have a huge role to play on where the pair breaks next.
With the pair pulling back, the key test below is 0.85, where the December lows coincide with the 50 fib level – November lows to December highs – and the 200/233-period SMA band on the 4-hour chart.
A move below here could tip momentum back in the favour of the sellers and see the pair resume its long-term downward trend. If this level holds, we could see another run at last week’s highs, and, who knows, the pair could be heading into the new year on a much more bullish note.
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