EUR/GBP Technical Analysis: Overshadowed by Rare Bearish Pattern
EUR/GBP Technical Analysis
- As expected, EUR/GBP fell flat on its face after a false breakout to the upside
- Numerous bearish signals hint the dominant downtrend could resume ahead
- Support at a range between 0.87237-0.87182, resistance is August trend line
As anticipated, the bearish warning signs in EUR/GBP prices ended up preceding a reversal following a false breakout above a descending trend line from August. The fundamental backdrop behind an aggressive decline in the Euro against the British Pound appeared to be as a result of positive Brexit updates from the UK. Following these developments, EUR/GBP seems poised to resume its dominant downtrend since August.
Looking at the weekly chart below, the pair is on course to forming a quite rare falling three method bearish candlestick pattern. Progress to the upside in the pair was impeded by a rising range of support from April (red parallel lines below) which reestablished itself as new resistance. Confirmation of this formation would require a weekly close under the October 15th candle and this might be the case in the near-term.
EUR/GBP Weekly Chart
Looking at the daily chart below reveals a bearish engulfing candle that formed following the peak of EUR/GBP’s uptrend in October. The candle itself stopped right on near-term rising channel support. But this was swiftly followed by another aggressive bearish candle which confirmed the reversal. This now places EUR/GBP facing a narrow range of horizontal support between 0.87237 and 0.87182 (June 2018 lows) next.
Descending through support exposes a range between 0.8680 and 0.8697 before targeting the current 2018 low at 0.8620. Meanwhile the descending trend line from August may reestablish itself as resistance in the event prices turns higher. Should EUR/GBP make further progress to the upside beyond that, resistance may hold next between 0.88418 and 0.88729.
EUR/GBP Daily Chart
Zooming in at the EUR/GBP 4-hour chart gives us a closer look of the break under the near-term rising channel (parallel blue lines below). Heading into the sharp decline, you can see where the false breakout to the upside precisely occurred and how resistance held.
EUR/GBP 4-Hour Chart
**Charts created in TradingView
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--- Written by Daniel Dubrovsky, Junior Currency Analyst for DailyFX.com
To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter