The EUR/GBP has been bleeding consistently in 2015. After clearing 0.7750, which was around the 2012 low, EUR/GBP has accelerated to lows not seen since late 2007, almost 8-years ago!
In the monthly chart, we can see that the decline started from the 2008 and historic high near 0.98. The bear run has picked up speed in the past 3-4 months. Note a multi-year consolidation between 0.6534 and 0.7255. Price has already broken below the top of this range, and is poised to push towards the 0.6550 area.
The monthly RSI is becoming very oversold, but there seems to be strong momentum downwards, so it might not be a good idea to “catch a falling knife”.
Even if we do have a pullback, we have to start looking at 0.7255 as a potential resistance.
We can see the devastation of the euro in the EUR/USD chart as well, even more so as we have 10 out of the past 11 months closing lower. Right now, everyone is talking about the parity level, which looks very easy to reach, even as the monthly RSI dips into oversold levels.
We should expect some support at 1.00 simply because all eyes are on it. But that does not mean the EUR/USD will turn around from there. If the FOMC does indeed raise rates mid-year, and leaves the door for further rate hikes, while the ECB deals with QE, a more aggressive bearish outlook would be towards the 0.9560 area, a support/resistance pivot from 2001 and 2003.
don’t let the fact that the monthly RSI is oversold lure you into catching this falling knife.Also, some might think there is support around 1.05 due to the falling channel support, but the bullish outlook might still be limited here.
If we find a bullish divergence, then we can start considering a possible reversal. I would think that will at least be after the Fed rate hike, and after the ECB has run a good half of the QE program (by the end of 2015).
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