The EUR/GBP extended the rally and climbed to 0.8717, hitting the highest level since April 16. The euro holds around the top with the positive tone intact. On Monday, EUR/GBP traded under 0.8600 before starting a recovery that gained speed during Thursday and Friday. Not even risk appetite weakened the move higher. Economic data from the UK and the Eurozone came in above expectations on Friday. The positive tone around the euro continues to drive EUR/GBP higher.
If the euro manages to hold above 0.8700, it could set up the scenario for an extension of the rally from the 0.8470 bottom. The next resistance is seen around 0.8730. A pullback under 0.8700 would alleviate the bullish pressure, and under 0.8600, the pound would be ready for a new leg higher. Analyst at Credit Suisse points out that if the EUR/GBP holds above 0.8721/32 it would see a potential ‘head & shoulders’ base established “to mark a more important turn higher with resistance than seen initially at the 38.2% retracement of the fall from December at 0.8761 ahead of 0.8793/99 and then more importantly at the ‘neckline’ to the medium-term top at 0.8851/61.”