Thursday’s action has seen an intraday double top pattern complete in the EURSGD, offering up both a technical bias and a potential downside target.
With the pair trading down to fresh weekly lows at 1.7201 during the Wednesday US afternoon session, it looked as if the bears would remain in control heading into the close of the week. Despite disappointing data out of Germany however, trade balance reported at 15.7B versus a consensus forecast at 17.8B, the EURSGD found resistance at aforementioned lows and traded up to fresh weekly highs at 1.7323. A small amount of resistance saw the GBPUSD correct to 1.7305, from which it once again reached aforementioned highs. Further resistance created the potential for a double top, and a downside reversal, and as the US markets opened on Thursday the pair broke through the 1.7305 neckline to complete the pattern.
The completion offers up a medium term downside target at 1.7268, which coincides with a 100% Fibonacci retracement of the Wednesday afternoon/Thursday morning uptrend. For the more risk averse traders, the Fibonacci retracement offers up a number of short term targets. The first is at 1.7289, or the 61.8% retracement level. A close below would bring the 200 SMA and the 78.6% retracement at 1.7280 into play, and beyond that, the pattern completion target.
Bear in mind that stochastics currently reveal the pair as being oversold, so a short term correction may be on the cards. Look for a failed retest of the broken neckline to validate a bearish bias. Also, consider that a range of key European data is scheduled for release as the European markets open on Friday. Any surprises in the German and Spanish inflation data, coupled with the French current account release, may reverse the technical bias offered up by Thursday’s intraday pattern.
To contact the reporter of this story; Samuel Rae at Samuel@forexminute.com