The Euro appears to have topped out against the British Pound and pulled back to lower levels, but the rally in the single currency is by no means over argue a number of technical analysts.

It's been a good period for the single currency against Sterling with the best exchange rate on offer to those buying Sterling using Euros was recorded just north of 0.93 on a spot market basis.

We are now seeing spot market levels closer towards 0.9150 with retail suppliers offering international payments in the region of 0.9071-0.8833.

The question at this juncture is whether the market will 1) Go higher, 2) Cap and head sideways 3) or retreat amidst a broader recovery in the Pound.

The first two points are most likely.

“Resistance at 0.9235/40 did cap price action yesterday, with the cross breaking down through 0.9150 confirming that the correction from 0.9306 highs is ongoing,” notes analyst Robin Wilkin at Lloyds Bank Commercial Banking.

Technical studies are pertinent at the moment with many analysts expressing surprise at Sterling’s recent improvement in fortunes, despite the ongoing negativity surrounding Brexit and less-than-stellar economic data.

“We see current GBP price action mainly as technical in nature. Last week’s Brexit negotiations didn’t yield any concrete progress and this issue will return to the forefront but Sterling shorts apparently are taking some chips of the table, in particular against a strong Euro,” says analyst Piet Lammens with KBC Markets in Brussels.

As such we must watch the charts for guidance and Wilkins at Lloyds notes daily studies are still unwinding, suggesting a move back towards more important trend support in the 0.9080–0.9020 region can be seen.

“While that area holds, we look for a higher low to develop for a move back towards the 0.9400-0.9700 "flash-crash" highs. A breakdown through 0.9020 would be the first sign that a more significant top has developed, within a developing medium-term range between 0.8250-0.9400,” says Wilkin.

Long term, Lloyds still risk a re-test and break of the 2008 highs at 0.9802. "A decline through 0.8800 range pivot and then 0.8250 is needed to negate this risk," says Wilkin.

Piet Lammens at KBC Markets says he is looking for the Euro to retrace, but he is maintaining a long-term Sterling negative bias.

"We maintain a buy EUR/GBP on dips approach as we expect the combination of relative Euro strength and Sterling softness to persist. The 0.9415 ‘flash-crash spike’ is the next target on the charts. However, we wait for a correction, e.g. to the technical support in the 0.88/89 area, to sell sterling again versus the euro," says Lammens.

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