Pound's Correction Against Euro Has Further to Run, Analysts Say

The Pound's correction against the Euro has further to run, with its short-term average now rolling over. The pair spent seven weeks handing back gains from an early-July surge, and the shorter moving average is descending into the longer one.

This downward trend in the shorter average indicates that the correction will extend rather than end. A bounce on Friday saw the market break beneath the longer average during trading but close above it, however this was still part of a sequence of lower highs unbroken since the July peak.

The UK calendar is largely bare for the week ahead, with only two second-tier surveys due out. The US economy will release its inflation report on Wednesday and Federal Reserve Chair Kevin Warsh's Jackson Hole speech is scheduled for Friday afternoon. These events have real power over this cross but a catalyst is needed to interrupt the current alignment.

The 21-day moving average has been falling since late July while the 50-day average is still rising, so they are converging from opposite directions. The gap between them is now barely a tenth of a cent and a short-term average descending into a longer one resolves in a crossover, which is expected to happen soon.