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EUR/GBP Technical Analysis: Waiting for Directional Conviction

EUR/GBP Technical Analysis: Waiting for Directional Conviction

Ilya Spivak,

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Talking Points:

  • EUR/GBP Technical Strategy: Flat
  • Euro stalling in digestion mode after hitting monthly high vs. British Pound
  • Waiting for directional conviction to emerge before committing to a trade

The Euro is in consolidation mode below the 0.79 figure after rising to the highest level in nearly a month against the British Pound. Prices began to recover having found support below the 0.76 threshold as expected after positive RSI divergence pointed to ebbing selling pressure

A daily close above support-turned-resistance at 0.7862 opens the door for a test of the 0.7609-28 area, marked by a horizontal pivot and the 61.8% Fibonacci retracement. Alternatively, a reversal below the 0.7752-75 area (trend line, 23.6% Fib expansion) paves the way for a challenge of the 38.2% barrier at 0.7695.

Positioning is inconclusive at this point. On one hand, a break of trend line resistance set from early April hints the near-term bias favors gains. On the other, the structural long-term down trend set from 2008 remains very much intact and in agreement with expected 2016 fundamentals. Opting for the sidelines seems prudent until greater clarity emerges.

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