The pound is gaining its stride in April. The EUR/GBP started the month with a bullish attempt that failed to reach a high from March at 0.7384. After this failed rally, it has been sliding. The break below 0.7222 last week completed a price top and the market has been consolidating since then as we can see in the 4H chart.
The 4H chart shows that EUR/GBP was in somewhat of a descending triangle in the past week. The previous support area between 0.7222 and 0.7235 became resistance. This was a sign that bears were in control even though the market was essentially sideways for a week. Another sign of bearish control is that price stayed under the cluster of 200-, 100-, and 50-period SMA after crossing below them. Finally, the RSI has held under 60 since the breakout, since it tagged below 30. This reflects maintenance of the bearish momentum since the bearish breakout.
Price action i during the 4/22 session is a bearish continuation breakout that confirms a previous bearish continuation breakout.
The daily chart shows that a bearish outlook is very much in line with the prevailing trend, which is still intact after the March correction. 1) The 200-, 100-, and 50-day SMAs are still sloping down and in bearish alignment. 2) Price held under the SMAs. 3) The RSI held under 60 after tagging below 30.
Therefore, today’s bearish breakout continues to put pressure on the 0.7014 low on the year. Let’s take a look at the month chart to see what the downside risk is in the medium-term if price falls below 0.7014 and the psychological level of 0.70.
As we can see in the monthly chart, price has been retreating towards the price range between 2003 and 2007, before the financial crisis. The middle of this range is around 0.6750-68, which is what we should see as a target for the current decline. However, a slightly more aggressive outlook would target the 0.6540, multi-year consolidation range low (2003-2007).
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