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Euro May Fall Further vs. British Pound as Key Support Gives Way

Euro May Fall Further vs. British Pound as Key Support Gives Way

Ilya Spivak, Head Strategist, APAC

EUR/GBP TECHNICAL ANALYSIS – Talking POINTS

  • Euro may be ready to resume 2021 downtrend vs British Pound
  • A decline of close to 3 percent to below 0.83 may be in the cards
  • Retail trader sentiment studies boost the case for a bearish bias

The Euro has broken below congestion range support in the 0.8531-37 area, with the case for downside follow-through seemingly reinforced by confirmation on a daily closing basis. This suggests that the downtrend in play since the start of the year has resumed after a consolidative pause.

Fibonacci expansion levels at 0.8467 (38.2%), 0.8386 (50%) and 0.8405 (61.8%) mark possible sticking points on the way lower. The broader view appears to suggest that the next major hurdle to truly challenge sellers emerges in the 0.8277-82 zone, implying a drop of 2.7 percent from current levels may be in scope.

Establishing a foothold back above 0.8537 may neutralize near-term selling pressure. A subsequent move north of the 0.8671-82 region is probably needed to flip the bias to an outright bullish setting however. Absent that, the path of least resistance probably leads lower.

Euro vs British Pound daily chart

EUR/GBP daily chart created with TradingView

EUR/GBP TRADER SENTIMENT

Euro vs British Pound retail trader positioning

Retail trader data shows 61.82% of traders are net-long with the ratio of traders short to long at 1.62 to 1. The number of traders net-long is 1.37% higher than yesterday and 8.98% higher from last week, while the number of traders net-short is 4.19% lower than yesterday and 0.44% lower from last week.

IG Client Sentiment (IGCS) is typically used as a contrarian indicator. So, that traders are net-long suggests EUR/GBP may continue to fall. Aggregate exposure is more net-long than yesterday and compared to last week, which hints at a strengthening bearish bias.

See the full IGCS sentiment report here.

EUR/GBP TRADING RESOURCES

--- Written by Ilya Spivak, Head Strategist, APAC for DailyFX.com

To contact Ilya, use the comments section below or @IlyaSpivakon Twitter

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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