One of the currency pairs that consolidated the most recently is the EURGBP. The EUR to GBP exchange rate hovered around the 0.9 level for most of the summer. It broke lower yesterday, and the triangle that acted as a reversal pattern has a measured move that points to 0.85.
Frustration grew higher and higher for traders involved in the EUR to GBP exchange rate. As the 0.90 acts as a pivotal level, the market bounced on every attempt to break lower. Even the current move may turn out to be nothing but a false breakout. As long as the pair keeps an eye on the 0.9 level, it will still attract the price action.
ECB Accounts Failing to Prop-Up the Euro
Yesterday the ECB published the accounts for its July meeting. To the surprise of many market participants, it hinted that the PEPP program, its emergency quantitative easing buying program might be limited at the current proposed amount.
Flexibility was one of the key drivers of the program, and the market learned that the ECB can be flexible and proactive – it proved it very well during the crisis. In normal times, such news would have created a bid behind the Euro pairs, but not this time.
The EURUSD fell below 1.18 today. EURAUD threatens to move back to the pivotal 1.60. Inevitably, the EUR to GBP exchange rate showed similar weakness.
EUR to GBP Technical Analysis
Every attempt higher that the EURGBP pair made was met with heavy selling. But buyers also stepped in at the 0.9 level.
The series of higher lows and lower highs points to a contracting triangle. The current break signals that the triangle acted as a reversal pattern.
Its measured move is the length of the longest segment projected from the breakout point. It signals a move towards the 0.85 area with a stop-loss at 0.9070 – a risk-reward ratio good enough to warrant a position.