The euro may be close to exhausting its 14-week bull run against the pound, as it faces a key moving-average barrier at 79.40 pence, which is embedded within a heavy price congestion area from 79.30 to 79.90 pence, Bloomberg Technical Analyst Sejul Gokal writes.
The candle session study, an indicator of trend exhaustion, suggests the euro’s rally may be waning after a 10-count was registered this week. Reversals tend to occur at counts of 10 to 13.
Current market sentiment is significantly skewed toward bullishness on the euro versus the pound. The pair’s one-month 25-delta risk-reversal rose yesterday to as high as 104 basis points for euro calls, climbing above the 100-basis-point mark for the first time since 2014. The move is 2.2 standard deviations above the one-year mean.
Note: Sejul Gokal is a technical strategist who writes for Bloomberg. The observations he makes are his own and are not intended as investment advice.