EUR/GBP Showing Signs Of Bearish Continuation
Fan Yang | Aug 25, 2014 02:33PM ET
After a rally from 0.7874, EUR/GBP stalled at a previous resistance pivot at 0.8033. The daily chart shows a rounded bottom attempt, which looks to be failing. The bearish signs still dominate in the daily chart.
1) Price is about to break back below 50-day simple moving aveage, which would put EUR/GBP below the 200-, 100-, and 50-day SMAs, which are in bearish alignment and are sloping down. This will reflect a mature bearish market.
2) The daily RSI came up to 60 and held. After tagging 20 in June, the RSI is now showing that the bearish momentum since then, is maintained.
It looks like there is still downside risk toward the 0.7874 low on the year, as well as the 0.7764, low from 2012. If you look at EUR and GBP against other currencies such as the Japanese Yen, you can see a divergence (EUR weakness, GBP strength), as EUR/JPY looks to keep a bearish outlook, and GBP/JPY is trying to preserve a bullish one.
EUR/GBP Daily Chart 8/25
When you look at the 4H chart, you can see that price still has some hurdles to clear before it looks bearish again. If price can clear below 0.7940, EUR/GBP should return below the 200-, 100-, and 50-period SMAs, and break below a rising trendline. The 4H RSI would also likley tag 30 and show bearish momentum.
If the market bearish, but there is a short-term bullish attempt, it should not return above 0.80. There should be sellers in the 0.7985-0.7997 area if not lower. Otherwise, a rally above 0.80 suggests EUR/GBP has a more significant consolidation/bullish correction in the works.
In the bullish correction scenario, first see if price can break above 0.8035. A break above this resistance can open up a bullish attempt the width of the price bottom betwee 0.8035 and the 0.7875 low, which is 60 pips. So a rally to 0.8095-0.81 could be in play if price breaks above the 0.8035 high.
EUR/GBP 4H Chart 8/25
Author: Fan Yang, CMT
http://www.forexminute.com
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