EUR/GBP – Bearish, Choppy, and with a Lot of Room to Fall

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EUR/GBP - Bearish, Choppy, and with a Lot of Room to Fall

EUR/GBP is bearish across the different time-frames, but is also choppy in all of them. (Monthly, Weekly, Daily, and 4H Charts). However, it still does have a lot of room to fall.

EUR/GBP 4H Chart 1/13
eurgbp 4h chart 1/13
(click to enlarge)

The 4H chart shows a market that has a bearish bias as price continues to trade below the 200-, 100-, and 50-period SMAs. Price action looks poised to test the 2014-2015 low at 0.7745 with risk of breaking lower.

Key Resistance: At the moment the 0.7870-0.7880 area is a key barrier above which the short-term outlook could shift back into sideways mode. (The daily chart also shows a key area around 0.79)

EUR/GBP Daily Chart 1/13
eurgbp daily chart 1/13
(click to enlarge)

The daily chart shows a market that has been consolidating since September/October 2014. But price action in late December broke below the triangle pattern formed over the months. Now, we have a pullback that is so far within the context of the bearish continuation scenario.

The daily chart shows that the area around 0.79 is important. A break above this could invalidate the bearish breakout and put EUR/GBP back into consolidation mode.

EUR/GBP Weekly Chart 
eurgbp weekly chart
(click to enlarge)

The weekly chart shows a bearish trend that has been following a falling channel since 2013. It has been hovering above the 2012 lows and looks ready to break them as price remained within the falling channel throughout 2014.

In the monthly chart we actually see a market that surged in 2007 through 2008. But since failing to reach 0.98, it has been retreating.

EUR/GBP Monthly Chart
eurgbp monthly chart 1/13
(click to enlarge)

The monthly chart also shows that the pair is in a falling wedge, and there is room to fall until reaching the falling support. The 0.7255-0.74 area contain a previous resistance pivot, and the 200-month RSI. It is also where the falling support is projected. If we are going to project any bottoms for the currently persistent downtrend, it should be in this 0.7255-0.74 area.

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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.