The value of one Euro in British Pounds (EUR/GBP) has been rallying strongly, with 'big' gains of 0.9% and 0.8% on Friday and Monday and a 'very big' 2.0% gain on Tuesday, closing in New York at GBP0.8140. Will the bullish momentum carry it higher?
Q: How has the EUR/GPB exchange rate fared in the past when it has seen a 'very big' one-day percentage gain when the rate has been in a bullish trend - closing above its 200-day average rate?
A: According to the 12 previous occurrences of this event, EventEdge indicates that EUR/GBP has shown a strong bullish edge that peaks 26 trading days after the event. Thus, the projected date for the peak of the bullish edge relative to the current event date (Tuesday, Nov. 4, 2008) is Thursday, Dec. 11, 2008.
EUR/GBP rallies in 83% of the cases (10 of 12) by an average of 2.0% relative to the close on the event date. The average of the two declines is 0.2%. The overall return of the 12 cases is 1.6%, which, based on the close of EUR/GBP on the event date (£0.8140), provides a target price of £0.8270.
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Gibbons Burke is editor of MarketHistory.com.
