EUR/GBP in a Bearish Continuation Breakout

0
125
EUR/GBP in a Bearish Continuation Breakout

The pound is gaining its stride in April. The EUR/GBP started the month with a bullish attempt that failed to reach a high from March at 0.7384. After this failed rally, it has been sliding. The break below 0.7222 last week completed a price top and the market has been consolidating since then as we can see in the 4H chart.

EUR/GBP 4H Chart 4/22
eurgbp4h0422015
(click to enlarge)

The 4H chart shows that EUR/GBP was in somewhat of a descending triangle in the past week. The previous support area between 0.7222 and 0.7235 became resistance. This was a sign that bears were in control even though the market was essentially sideways for a week. Another sign of bearish control is that price stayed under the cluster of 200-, 100-, and 50-period SMA after crossing below them. Finally, the RSI has held under 60 since the breakout, since it tagged below 30. This reflects maintenance of the bearish momentum since the bearish breakout.

Price action i during the 4/22 session is a bearish continuation breakout that confirms a previous bearish continuation breakout.

EUR/GBP Daily Chart 4/22
eurgbpdailychart04222015
(click to enlarge)

The daily chart shows that a bearish outlook is very much in line with the prevailing trend, which is still intact after the March correction. 1) The 200-, 100-, and 50-day SMAs are still sloping down and in bearish alignment. 2) Price held under the SMAs. 3) The RSI held under 60 after tagging below 30.

Therefore, today’s bearish breakout continues to put pressure on the 0.7014 low on the year. Let’s take a look at the month chart to see what the downside risk is in the medium-term if price falls below 0.7014 and the psychological level of 0.70.

EUR/GBP Monthly Chart 4/22
eurgbpmonthlychart
(click to enlarge)

As we can see in the monthly chart, price has been retreating towards the price range between 2003 and 2007, before the financial crisis. The middle of this range is around 0.6750-68, which is what we should see as a target for the current decline. However, a slightly more aggressive outlook would target the 0.6540, multi-year consolidation range low (2003-2007).

Previous Post by Author: GBP/JPY Advances with 181 in Sight

SHARE
Previous articleGBP/JPY Advances with 181 in Sight
Next articleThe Users who Lost Bitcoin at MtGox may now get the Back Thanks to Kraken
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.