The Pound is under pressure as markets worry that the UK's bargaining position has been weakened by setting a date to start the formal Brexit process. However, there's a long way to go in this whole saga and the Euro has its own risks. This suggests a cap on just how far it might rally against the Pound, making approaching chart resistance interesting.
The Pound is under pressure as markets worry that the UK's bargaining position has been weakened by setting a date to start the formal Brexit process.
However, there's a long way to go in this whole saga and the Euro has its own risks. These include undercapitalised banks; talk of the ECB preparing to taper its QE program and the potentially negative impact of Brexit on Europe itself. All this suggests a cap on just how far the Euro might rally against the Pound at this stage.
The Euro is approaching possible chart resistance against the Pound. I'll have a watching brief on this being rejected as a potential sell signal.
Caution and patience are required of course. The current Pound trend is strong. If it does not show signs of turning at this resistance but just powers straight through, then the whole thing will look like a "frieght train" not to stand in front of at this stage.
The resistance line is shown on the chart above and looks like the upper boundary of a trading range situation. Right at the moment the current upswing is the same size as the one before it. This would add to the possible significance of any turning point* that happens between current levels and a little on the other side of the resistance. Rejection of this resistance creates the possibility of a return to the pattern support.
* By turning point I mean candles starting to make lower highs and lower lows.