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EUR/GBP Technical Analysis: Upswing to Yield Short Trade Setup

EUR/GBP Technical Analysis: Upswing to Yield Short Trade Setup

Ilya Spivak,

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Talking Points:

  • EUR/GBP Technical Strategy: Flat
  • Euro Aims to Extend Recovery vs. British Pound After Resistance Break
  • Upswing Seen as Corrective Within a Larger Multi-Year Down Trend

The Euro is attempting to extend its move higher against the British Pound, with prices probing the highest level in a month. Prices advanced for a fifth consecutive day, marking continuation of a rising trend set from mid-July after a brief period of consolidation.

From here, a daily close above the 50% Fibonacci expansion at 0.7442 opens the door for a challenge of the 0.7482-0.7500 area marked by the September 7 high and the 61.8% level. Alternatively, a reversal back below the 38.2% Fib at 0.7384 – now recast as support – clears the way for a test of 0.7312, the intersection of Flag top resistance-turned-support and the 23.6% expansion.

The dominant EURGBP trend established in late-December 2008 continues to favor the downside. Sizable corrective upswings within the larger decline have averaged around 13 percent, while the current move has amounted to about 7.5 percent thus far. This hints that the Euro may have substantial space for further correction without disrupting the larger trajectory. With that in mind, we will remain on the sidelines and wait for a the upswing to yield a short trade setup once the counter-trend move is exhausted.

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