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EUR/GBP Technical Analysis: Hammer Candle Hints at Bounce

EUR/GBP Technical Analysis: Hammer Candle Hints at Bounce

Ilya Spivak, Head Strategist, APAC

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Talking Points:

  • EUR/GBP Technical Strategy: Flat
  • Hammer candlestick hints Euro may attempt another bounce vs. Pound
  • Looking to any recovery as a developing opportunity to enter short trade

A Euro recovery against the British Pound proved short-lived, with prices swiftly retreating back to familiar support above the 0.83 figure. However, the appearance of an Inverted Hammer candlestick hints at indecision and may precede another attempt at a rebound by the single currency.

Near-term resistance is at 0.8522, the 23.6% Fibonacci retracement, with a break above that on a daily closing basis paving the way for a challenge of the 38.2% level at 0.8656. Alternatively, a drop below the 0.8330-55 area (support shelf, 23.6% Fib expansion) exposes the 38.2% threshold at 0.8220.

Positioning is inconclusive at this point. The Hammer candlestick doesn’t amount to an actionable signal by itself without further confirmation. Further, the dominant trend bias still seems to favor weakness. With that in mind, opting for the sidelines and waiting for an upswing to yield a short entry point seems most prudent.

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