Euro May Fall Further vs. British Pound as Key Support Gives Way
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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.
EUR/GBP TRADER SENTIMENT
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.
EUR/GBP TRADING RESOURCES
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--- Written by Ilya Spivak, Head Strategist, APAC for DailyFX.com
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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.