Assessing the EUR/GBP’s Price Bottom Attempt

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Assessing the EUR/GBP's Price Bottom Attempt

The EUR/GBP started the week falling further into a new low on the year at 0.7405.

EUR/GBP 4H Chart 1/30
eurgbp 4h chart 1/30
(click to enlarge)

Analogous Price Action:
The 4H chart shows that price has been consolidating with resistance roughly around 0.75 and a support just below 0.7450. As we get into the 1/30, Friday session, EUR/GBP has broken that 0.75 resistance, but is stuck again awaiting further direction.

We can see a similar consolidation last week, when price consolidated between 0.76 and roughly 0.77. Then there was a spike that briefly broke 0.77, but price action retreated quickly and eventually fell lower.

As price tests the 50-period SMA again, price action is so far analogous to last week’s price action, so resistance can be expected.

If price falls below 0.75 and holds below that to wrap up the week, EUR/GBP could be ready for another leg in its current downtrend. We will talk about the downside risk later when we look at the monthly chart.

To the upside, a break above 0.7540 will encourage further bullish correction in the short-term, and the immediate target will be the previous support area roughly between 0.76 and 0.7620. Because the prevailing trend is intact and persistent, we should expect the market to try to fade this rally around 0.76, especially if the 4H RSI is around 60. If price stalls around 0.76 and the 4H RSI stalls around 60, get ready for a bearish attempt to first test the 0.75 handle, then the 0.7405 low if 0.75 breaks.

EUR/GBP Monthly Chart 1/30
eurgbp monthly chart 1/30
(click to enlarge)

Downside Risk: When we look at the monthly chart, we can see that price has been bearish since 2009 after a high near 0.9798. The decline has even broken below a rising speedline coming up from the 2000-low at 0.5683.

Price will meet the 200-month SMA around 0.7370. Below that a key resistance level around 0.7255 would likely act as support at least for the short-term, with bullish outlook at least back to the middle of this week’s price range between 0.7450 and 0.75.

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Fan Yang has been a professional forex trader and analyst since 2007. He specializes in technical analysis and has a Chartered Market Technician designation since 2011. He was the chief technical strategist at CMSFX He was also the founder and chief currency strategist at FXTimes Over the years, Fan has not only been a trader and analyst but also an educator. As a proponent of both technical and fundamental analysis in trading, Fan advocates simplicity and discipline as key factors in making trading decisions when faced with so many "clues" and "signals". Currently Fan Yang is the chief currency analyst and webinar instructor at forexminute.com.