EURGBP Short-Term Channel (Mar 27, 2017)

Price gapped higher over the weekend and is about to test the channel resistance around .8670.

The 100 SMA is below the longer-term 200 SMA so the path of least resistance is to the downside. Also, the 200 SMA coincides with the channel resistance, adding to its strength as a ceiling. Stochastic is making its way down from the overbought zone to indicate a return in selling pressure.

In that case, the pair could head back down to the channel support around .8570 or until the previous lows close to the .8600 major psychological level. On the other hand, a climb past the channel resistance could lead to a reversal from the downtrend.

Economic data from the euro zone turned out mostly stronger than expected last Friday, as flash manufacturing and services PMI readings from Germany and France printed improvements and showed a much stronger pace of expansion among the industries. There were no economic reports out of the UK then.

German Ifo business climate data is due today and a rise from 111.0 to 111.2 is eyed, indicating a pickup in confidence. Stronger than expected data could lead to another boost for the shared currency as most economic figures have been supporting the shift in the ECB's stance to a less dovish one.

There are no major reports due from the UK today, but the pound has also drawn some support from upbeat CPI and retail sales data. However, the main theme for the currency's price action this week is the looming Article 50 date on March 29 as the European Council's response could set the tone for upcoming negotiations.

By Kate Curtis from Trader's Way