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EUR/GBP Technical Analysis: Bearish Reversal Hints Return

EUR/GBP Technical Analysis: Bearish Reversal Hints Return

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Talking Points:

  • EUR/GBP Technical Strategy: Flat
  • Euro downturn clues return as prices show Shooting Star, RSI divergence
  • Absence of clear-cut confirmation argues against entering short position

The Euro is showing early signs of topping once again after rising to the highest level in five years against the British Pound. A Shooting Star candlestick hints indecision after a five-day winning streak and developing negative RSI divergence points to ebbing upside momentum.

A reversal below support in the 0.8725-77 area (August 16 high, 38.2% Fibonacci expansion) opens the door for a challenge of a rising trend line at 0.8674. Alternatively, a push above the 50% level at 0.8914 paves the way for a test of the 61.8% Fib at 0.9050.

The Shooting Star candle is not an actionable reversal signal without further confirmation even with support from RSI divergence. Similar false starts have been common on the way up from early-September lows and waiting for a clear-cut reversal on a breach of trend line support seems like the prudent thing to do.

Track short-term EUR/GBP trading patterns with the GSI indicator !

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