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EUR/GBP Technical Analysis: Three-Week Rebound Over?

EUR/GBP Technical Analysis: Three-Week Rebound Over?

Ilya Spivak, Head Strategist, APAC

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Talking Points:

  • EUR/GBP Technical Strategy: Flat
  • Euro forms bearish candlestick pattern, breaks near-term trend support
  • Risk/reward setup, “Brexit” vote overhang argue against taking a trade

The Euro put in a bearish Evening Star candlestick pattern, hinting that an expected rebound against the British Pound may have run its course. Prices have now broken trend line support set from late May, hinting the long-term down move may be resuming.

Near-term support is at 0.7864, the 23.6% Fibonacci expansion, with a break below that paving the way for a test of the 38.2% level at 0.7784. Alternatively, a daily close above the May 4 high at 0.7947 opens the door for a challenge of the June 16 top at 0.7995.

Entering short looks unattractive from a risk/reward perspective for now as prices sit squarely at near-term support. Furthermore, the chart setup may be materially altered amid pre-positioning for next week’s pivotal “Brexit” referendum. With that in mind, it seems prudent to remain flat for now.

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