# Inside the Currency Market: EUR/GBP Vs GBP/EUR Targets, Forecasts

To move EUR/GBP up, we must buy Euros, sell GBP's. Why buy Euros rather than GBP's? Interest rates, 0.75 Eurozone vs 0.50 UK. Higher interest rate currencies always outperform the lower currency. But as EUR/GBP rises, GBP/EUR falls. To understand exchange rates is to look at the morning United States Fix,

Jan 22, EUR/GBP was fixed at 1 EUR = 0.83965 while 1 GBP cost or = 1.19097, a Fix price of 0.70501 but a market price 0.8400 thereabouts.. GBP/EUR consequently was Fixed in the opposite direction.  1 GBP = 1.19097 to 1 EURO at 0.83965 is an exchange rate of 1.4184.

If EUR/GBP was fixed at 0.70501 and the traded spot price is 0.8400 then EUR/GBP is overvalued by 1350 pips by the Fix. GBP/EUR is then undervalued by 1.4184 minus 1.1909 = 0.2275 pips at the traded spot price of 1.1909.

If traded market prices is the guide then EUR/GBP exchange rate at 0.8400 corresponds to GBP/EUR exchange rate of 1.1900. For every rise of EUR/GBP is a fall in GBP/EUR because we must buy EUR and sell GBP in the EUR/GBP equation while others may buy GBP, sell Euros in the GBP/EUR combination.

What is traded in the spot market is the price prediction of 1 currency and that is factored by most in the last two digits in the exchange rates. To earn 3 pips from EUR/GBP from 0.8411 to 0.8414, EUR/USD must go from 1.3311 to 1.3314 and GBP/USD holds at 1.5825 as one example of many combinations. Divide EUR/USD by GBP/USD to equal EUR/GBP and GBP/USD divided by EUR/USD = GBP/EUR. The corresponding long 3 pips of EUR/GBP is a fall by 3 pips in GBP/EUR.

Predictions.

EUR/GBP from my full distribution of averages 5-253, must correct back to 0.8312, 0.8298 and 0.8282. GBP/EUR correspondingly rises to 1.2030, 1.2051 and 1.2075.

EUR/GBP targets from averages: 0.8395, 0.8388, 0.8372, 0.8345, 0.8302, 0.8268, 0.8234, 0.8211 and 0.8142 longer term.

GBP/EUR targets from averages: 1.1910, 1.1920,1.1929, 1.1943, 1.1983, 1.2044, 1.2096, 1.2145, 1.2180, 1.2225, 1.2225, 1.2259, 1.2267 and 1.2282.

I'm Brian Twomey, not a coach nor signal service so respectfully ask to seek advice elsewhere.

Views: 434

Comment by Peter jcp on January 23, 2013 at 9:11am

Morning Brian - well the EG as been dropping from the Opens whilst the GU tries up and the EU looks weaker. As i type this we would need under 0.8372 to continue the present fall - but my attentions have been more with EJ and GJ - as the movements have been larger

Have a great day

Regards

Peter

Comment by Brian Twomey on January 23, 2013 at 9:48am

Morning Peter, I see EG 72, 88 is rock solid also then should head to lower 0.8300's on break. Here's your EU levels: 1.3362, 1.3338, 1.3314, 1.3313, 1.3300, 1.3296, 1.3288, 1.3256, 1.3215, 1.3172, 1.3144. Been experimenting with educational posts, not going anywhere I notice. Reconsidering that idea. What happened to Mr. Sir Gissa, stay well Peter

Comment by Peter jcp on January 23, 2013 at 9:57am

Yes will be interesting to see if EU can get near 3362 before falling again? will be watching that one - and then if it does drop under 3300 again would agree with your down points.

With regards to Sir Gissa - its been a long holiday break I believe - I just wonder if he stuck on some mountain top awaiting a nice ski down lol

Comment by Brian Twomey on January 23, 2013 at 10:15am

Peter, Can't have EG exchange rate 1.1909 vs 0.8396 without healthy correction. Not sure 3362 either but its part of my seriouly upgraded model. Well regards to Mr. Sir Gissa if you communicate off  forum

Comment by Andras Toth on January 23, 2013 at 9:18pm

Hi,

How fix price was calculated?Fix price of 0.70501

1/1.19097=0.83965

thank you

Comment by Noel on January 23, 2013 at 10:17pm
Andras, it's the fixing rate by the ECB at approx 13.15 on the 22nd Jan
Comment by raj patel on January 23, 2013 at 10:43pm

Brian,

Very educational examples of how rates are calculated in Denomi/Numerator combination

In fractions when the top number is numerator and the bottom part of faction is denominator

then the sum of the fraction is the value of Eurgbp (0.83965 divide by 1.19097) = 0.70501 and the opposite  is (1.19097 divide by 0.83965) = 1.41841 because both are major currencies they are Numerators in its own right

Comment by Brian Twomey on January 23, 2013 at 11:00pm

Andras,  Divide the numerator by denominator, EUR/GBP = divide EURO  0.83965 by GBP 1.19097 = EUR/GBP 0.70501 exchange rate

Comment by Brian Twomey on January 23, 2013 at 11:03pm

Hi Raj my friend, You know I always appreciate your comments especially coming from you

Comment by Brian Twomey on January 24, 2013 at 10:27am

Hi Peter, Where forth art thou EU. As long as EU remains closed in 3300 neutral zone Peter, no math test under forex god earth can find direction, 3400 is overbought, high to mid 3200's are oversold so must sell tops buy dips. Check out CAD pairs Peter, U/CAD, E/CAD, GBP,CAD, CAD,JPY  instead if EU goes nowhere, always wish you well Peter and profitable trades

Comment

Join FXstreet.com Forex Social Network

by pixta