EUR/USD and EUR/GBP: Bearish Price Action vs. Key Support

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EUR/USD and EUR/GBP: Bearish Price Action vs. Key Support

The USD has been resilient since last week. The GBP is finding strength as well after the BoE meeting minutes leaned had a hawkish tone in terms of inflation. Subsequently, the EUR/USD and EUR/GBP are both showing bearish continuation price action towards key support levels.

EUR/USD 1H Chart 5/20
eurusd 1h chart 5/20
(click to enlarge)

In the 1H EUR/USD chart, we can see that price respected a short-term falling trendline as resistance. Then a strong bearish candle started the 5/20 US session signaling bearish continuation. But let’s hold off the horses for now because there are some key support factors just ahead.

EUR/USD 4H Chart 5/20
eurusd 4h chart 5/20
(click to enlarge)

The 4H chart shows that price is testing a previous support pivot at 1.1065. Just below down, down to the 1.10 we can see a rising trendline and the 200-period SMA. Therefore, we should limit the bearish outlook signaled in the 1H chart to the 1.10 handle for now. A break below that might open up further downside risk, with the 1.0520 support area in sight. Otherwise, we should anticipate a pullback to test the 1.13 handle. A break back above 1.13 would signal bullish continuation and bring last week’s high at 1.1466 in play.

EUR/GBP 1H Chart 5/20
eurgbp 1h chart 5/20
(click to enlarge)

The EUR/GBP also started the 5/20 US session with bearish continuation price action. It looks like there is a descending wedge forming, and a break above 0.7180 might neutralize the bearish outlook, but only a break above the 0.7230 area should open up a bullish outlook. Now to the downside, we have a couple of key support factors ahead.

EUR/GBP 4H Chart 5/20
eurgbp 4h chart 5/20
(click to enlarge)

Looking at the daily chart, we can see that the prevailing trend is bearish, and that after a consolidation since March, the bearish bias still remains. The immediate support is around 0.71-0.7105. Below 0.71, the 0.7014 low on the year comes into play. The EUR/USD seems to have bullish tilt, while the EUR/GBP seems to have a bearish one. While we should limit the bearish outlook in EUR/USD, we should anticipate the 0.7014 low on the year to break if price does indeed threatens this support.

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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.