EUR/GBP – Short-term Bulls vs. Medium-term Bears

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EUR/GBP - Short-term Bulls vs. Medium-term Bears

The EUR/GBP has been bullish in March after marking a low on the year at 0.7014. It rallied to 0.7384 before stalling last week. The 4H chart shows the rally in something of a rising channel. The 4H RSI has shown strong momentum (RSI popping above 70, and holding above 40). The fact that price broke above the 200-, 100-, and 50-period SMAs also signal a possible reversal in this time-frame, which could translate into a significant correction against a prevailing downtrend.

EUR/GBP 4H Chart 3/30
eurgbp 4h chart 3/30
(click to continue)

The 4H chart also shows that since retreating from 0.7384 last week, price is still holding above the cluster of SMAs and the RSI is still holding above 40. This shows that despite price trying to break below the channel support, bulls are still in control in the short-term.

Above 0.73, EUR/GBP looks poised for further upside risk towards 0.7384 and beyond.

EUR/GBP Daily Chart 3/30
eurgbp daily chart 3/30
(click to enlarge)

The daily chart has the mirror image of the 4H chart. It shows a prevailing bearish trend, with price still holding under the cluster of 200-, 100-, and 50-day SMAs. Meanwhile, price is respecting a falling trendline coming down from December’s highs around 0.80, and the RSI held under 60, showing maintenance of the bearish momentum.

While the 4H chart shows that bulls in the short-term remains in charge, the daily chart shows that the prevailing bearish mode in the medium-term is still intact. Who will win?

If price pushes above 0.74, we can say that bulls have won and would open up a bullish outlook towards 0.76 in the short medium-term. However, if price holds under the 0.7385 high and falls back below 0.73, the pressure would remain to the downside. After, the prevailing trend is bearish, so we should favor the bearish outlook. A break below 0.73 would revive the bearish outlook with the 0.7014 and 0.70 handle in sight.

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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.