Forex Video Briefing (8/7) – EUR/GBP after the ECB and BOE Statements
The EUR/GBP has been consolidating since July, stalling a bearish trend throughout 2014. The 4H chart shows support at 0.7874, while resistance is around 0.7980. Price has fallen back to the middle of this range ahead of the central bank meetings. The middle, or central pivot area can be represented by the cluster of moving averages (200-, 100-, and 50-period SMAs) in the 4H chart, or the 0.7915-0.7934 range.
During the central bank statements and ECB’s press conference, traders tried to bid up the EUR/GBP, but it found resistance around 0.7955. In the 4H chart, you can see that price eventually came back down and remains in the central pivot area. This reaction shows that bulls are weak, unable to clear above the moving averages. If price end up below 0.7915 after the upcoming session (8/8), the EUR/GBP will likely be in a bearish continuation. In the daily chart, you can also see price holding below a falling trendline after briefly violating it. The bearish trend therefore remains in play.
It would take a bounce from 0.7915 above 0.7950 to signal a possible price bottom. In this scenario, we would be looking at a Kilroy, or inverted head and shoulders. Then, a break above 0.7990 would signal a significant consolidation/bullish correction. Otherwise, we should look for price to test the 0.7874 low, with downside risk toward the 0.7764 support pivot and 2012-low.