Euro / British Pound (EUR/GBP) : Close to a key level
By Rodolphe Steffan
The latest economic statistics published in the U.K. are not very encouraging. U.K inflation unexpectedly fell to its lowest level in two and half years. Consumer prices rose only 2.4% from a year earlier, its lowest level since November 2009. The euro has not taken advantage of this news. In fact, German ZEW economic sentiment declined for a third month as the eurozone debt crisis dimmed the economic outlook.
Besides, Ben Bernanke announced on Tuesday his intention to use monetary tools to support the U.S. economy. Yesterday morning the Bank of England voted to increase economic stimulus. The members decided to increase quantitative easing to 365 billion pounds. The euro took benefit from this announcement on Wednesday morning before erasing its gains in the afternoon. However, investors have tried to stabilize the currency pair around 0.783 for few days.
Technically, the euro could find some support on the lower bound of the range at 0.775/0.78 as suggested early this week on the pair. Quick recovery to 0.80 could release the downward pressure and eventually investors could test the 20 week moving average at 0.82 which has been a dynamic resistance since the summer of 2011. Conversely, the breakdown of the 0.78 support would open a downside risk.