Pound Euro Outlook

The last comment concentrated on the euro and how it is likely to be buffeted around by Greece. This was certainly the case on Friday, as overnight weakness to fresh lows for the week was reversed sharply on rumours of a swift end to the saga. That seems unlikely as the relevant parties seen so wide apart.

For the British pound, economic data (apart from employment) has been weak, as wages are squeezed and inflation rages. Thankfully for treasury departments, the technical picture is somewhat benign as the currencies ebb and flow through statistics.

The weekly chart below shows how the market is trapped between a triangle formation. This is one of the few classic patterns I respect, and it means that the market is in a sideways trend, until a weekly close beyond a line, or the market just continues sideways into next February.

Within the pattern, my analysis of price and time has an inner range of 1.1580 above and 1.1170 below. A break of either suggests an attack on the relevant trend line and all four levels can be used as reference points of relevant hedging activity.

Figure 1: Pound Euro Outlook

Source: CQG