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EUR/GBP Technical Analysis: Trend Reversal in Progress?

EUR/GBP Technical Analysis: Trend Reversal in Progress?

Ilya Spivak,

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Talking Points:

  • EUR/GBP Technical Strategy: Flat
  • Euro drops most in a month after forming bearish candlestick pattern
  • Waiting for downturn confirmation to pull the trigger on short trade

The Euro moved sharply lower against the British Pound, with prices putting in the largest daily decline in a month. The move downward followed the formation of a Bearish Engulfing candlestick pattern below rising channel resistance in play since early March.

Near-term support is in the 0.7928-51 area, marked by February 25 high, the channel floor and the 14.6% Fibonacci retracement. A break below that on a daily closing basis exposes the 23.6% level at 0.7849. Alternatively, a reversal back above the 38.2% Fib expansion at 0.8014 sees the next upside barrier in the 0.8126-44 zone (50% expansion, channel top).

We are keen to enter short EUR/GBP in line with our 2016 fundamental outlook. Confirmation of reversal is absent for now absent the break of the near-term series of higher highs and lows. With that in mind, we will monitor price action for follow-through and wait for a better-defined selling opportunity.

Where is the Euro going in the second quarter? See our forecast here !

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