EURGBP’s rise has met key resistance which – though likely to hold for a while – will probably be broken within a few weeks, says David Sneddon and his team at Credit Suisse in London.
Sneddon says EURGBP’s surge higher has met key resistance at 0.8852/54, which is the January 2017 high and the 50% retracement of the October to December 2016 decline (see Chart). He thinks this level should halt the rise for a while, but an eventual break above it is likely to open up a more extended rally to 0.9028 with a cap expected at the 0.9050 high.
Below, support levels can be found at 0.8747/44, 0.8699, last week’s low at 0.8651, and then the 200-day moving average at 0.8607/02. Sneddon believes this last level is significant and should hold, although its removal would signal a deeper sell-off to 0.8551/24.
As such, Sneddon’s strategy is currently flat, but would look to buy at 0.8555 for a target of 0.8850, with a stop below 0.8524.