EURGBP Pullback to .7150 (Aug 31, 2015)

From there, the pair zoomed up to the .7400 major psychological resistance before pulling back.

Using the Fib tool on the latest swing low and high shows that the 61.8% Fibonacci retracement level is just above the broken resistance. Meanwhile, the 50% Fib lines up with the 200 SMA, which is currently below the 100 SMA so the uptrend is likely to carry on.

Stochastic is on the move up but is almost in the overbought zone, which means that buying pressure might fade soon. On the other hand, RSI has enough room to rise, indicating that buyers are just gaining traction. Further rallies for EURGBP could take it up to .7400 and beyond while a larger correction could last until the .7100 mark.

Event risks for this trade today include the release of euro zone CPI estimates and German retail sales report. Stronger than expected data could allow the euro to regain ground against its forex counterparts, especially since the positive sentiment following the Greek bailout is still present.

As for the pound, there are no reports lined up for today but tomorrow has the manufacturing PMI on tap and it is expected to hold steady at 51.9 for August. Wednesday has the construction PMI due while Thursday has the services PMI lined up, and this might be a bigger catalyst for pound movement.

Also on Thursday, the ECB is set to make its interest rate statement. No actual policy changes are expected for now but Governor Draghi is likely to provide more insight on the central bank’s bias, given the recent slump in global equities. Reassuring comments could give support for the shared currency while cautious remarks could spur declines.

By Kate Curtis from Trader's Way