EUR/GBP Outlook - Further Losses Seem Likely if Fibonacci Support Fails
Sterling (EUR/GBP) Price, Analysis and Chart:
- The weekly chart remains bearish for EUR/GBP
- Longer-term support levels may slow the sell-off down.
The weekly EUR/GBP chart shows the sell-off in EUR/GBP since early December 2020, with little in the way of any bounce back over the last three months. The pair has broken below the 0.8667 horizontal support and now look set to test a cluster of old lows all the way back down to 0.8280 to 0.8310. Before we test these lows, the 38.2% Fibonacci retracement of the July 2015-March 2020 at 0.8522 needs to be taken out, and this is likely to be the first target of a larger move lower.
EUR/GBP Weekly Price Chart (February 2015 - March 8, 2021)
The daily EUR/GBP chart shows how the three moving averages are dictating price action with the 20-day simple moving average, in particular, capping any upside momentum. The three simple daily moving averages are also all in order, adding another layer of bearish sentiment, while the 50-/200-sma ‘death cross’ on December 17 when the pair closed around 0.9015 suggests lower prices ahead. For reference, the spike lower in EUR/GBP on Wednesday, February 24 was caused by a very short-term illiquidity issue in Asian hours which was reversed within a couple of minutes.
EUR/GBP Daily Price Chart (March 2020 – March 8, 2021)
IG client sentiment data show 59.15% of traders are net-long with the ratio of traders long to short at 1.45 to 1. We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests EUR/GBP prices may continue to fall. Positioning is less net-long than yesterday but more net-long from last week. The combination of current sentiment and recent changes gives us a further mixed EUR/GBP trading bias.
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