EUR/GBP Consolidating as it Threatens a Bullish Correction

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EUR/GBP Consolidating as it Threatens a Bullish Correction

Consolidation after Downswing:
EUR/GBP fell sharply last week, basically from 0.8009 to 0.7810. The 1H chart shows the pair rebounding from 0.7810 and attacking last week’s falling trendline. We can say the trendline is broken, and the short-term downtrend is taking a break, but the breakout is really a sideways one, as EUR/GBP started to consolidate roughly between 0.7854 and 0.7878. Now if price breaks below 0.7850, we are likely in a bearish continuation first with the 0.7810 in sight for the session, but a break below that in sight as well.

EUR/GBP 1H Chart 9/22
eurugbp 1h chart 9/22

(click to enlarge)

Bullish Correction; Resistance:
If price holds above 0.7850 and pushes above 0.7880, EUR/GBP would be in a bullish correction. The 0.79 level is an immediate challenge. It is around where the 100-hour SMA and a previous resistance pivot reside.

In the 4H chart, we can see that 0.79 was also a previous support pivot. A break above 0.79 can open up a sharper bullish correction, but it is still within the context of a bearish trend. The cluster of simple moving averages and a key support pivot start around 0.7940. We can expect sellers here, especially if the 4H RSI is around 60.

Also, note the falling trendline connecting the 0.8065 and 0.8009 highs. This will be a more important trendline than the one we saw in the 1H chart in terms of keeping the bearish trend alive. I did not put the fibonacci retracement levels here, but the 0.7937 level is 50% retracement.

EUR/GBP 4H Chart 9/22
eurgbp 4h chart 9/22

(click to enlarge)

Bearish Trend:
When we examine the weekly chart, we can see that EUR/GBP has been on a choppy downtrend since 0.98, 2009 high. Now, the next key support pivot is the 2012 low at 0.7764. With the prevailing downtrend on its back, EUR/GBP looks poised to test, and even break this level in 2015.

EUR/GBP Weekly Chart
eurgbp weekly chart 9/22

(click to enlarge)

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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.