EUR/USD and GBP/USD Spiking to New Lows

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EUR/USD and GBP/USD Spiking to New Lows

The EUR/USD and GBP/USD started the week with a spike down into new lows, continuing their respective downtrends. The spike suggests that bears are still in charge, but there are some buyers for EUR/USD at 1.19 and GBP/USD at 1.52. Let’s take a look at the charts to assess the technical conditions.

EUR/USD 4H Chart 1/5
eurusd 4h chart 1/5
(click to enlarge)

Bearish Continuation: The EUR/USD has revived a prevailing bearish trend since mid-December when it retreated from 1.2570. Note that price has since traded below the 200-, 100-, and 50-period SMAs, and the RSI has repeated tagged 30. The bearish conditions extended into the start of this week as price fell below 1.20 and even below 1.19 briefly before a quick rebound.

Oversold: We are seeing some support here just under 1.19, and the 4H RSI reading can be interpreted as extremely oversold. So while the EUR/USD continues to be bearish, the area between 1.19 and 1.20 might not be a good place to short at least until further consolidation after which the market would no longer be oversold.

Key Support: Price is essentially testing the the 2010-low at 1.1875. Let’s expect some consolidation or at least choppiness this week as EUR/USD remains bearish but is oversold and at a key support. Now below 1.1875, the next key support might be the 2005-low at 1.1638.

GBP/USD 4H Chart 1/5
gbpusd 4h chart 1/5
(click to enlarge)

Bearish Spike: GBP/USD ended last week falling into new lows, continuing the 2014-downtrend. This end of year-beginning of year decline was sharp, breaking a December-low/support at 1.55 and starting this week with a spike down to 1.5170.

Oversold: We do see a sharp rebound here around 1.52, so we know there are some buyers/profit-taking around these levels, especially with the 4H chart showing extreme oversold condition.

Support: For cable, the decline below 1.52 is breaking below lows in 2011-2012. The next key support will be the 1.50 psychological level, then the 2013-lows in the 1.4815-1.4840 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.