Last week, we took a long-term look at EURUSD in the wake of the ECB’s historic QE announcement in order to identify the next major support levels to watch (see “EURUSD in Freefall, is Parity On the Cards?†for more). As we go to press, EURUSD is still consolidating near the long-term Fibonacci retracement at 1.1200, despite the far-left Syriza party’s victory in this weekend’s Greek election. While many traders are understandably focused on EURUSD (which is, after all, the world’s most widely-traded currency pair), EURGBP is also testing a massively important long-term support level.
Zooming all the way out to a monthly chart (below), we can see that EURGBP has been broadly trending higher since bottoming at .6000 all the way back in Q2 2000. After the runaway surge nearly to parity in 2008, the pair has put in a series of lower highs and lower lows and is back down near .7500, threatening the decade-and-a-half bullish trend line off the 2000 low.
Of course, it will take more than just today’s brief thrust below .7500 to consider it broken, but the monthly MACD indicator is showing strong bearish momentum that could take rates through that floor. On the other hand, bulls can build the case for a bounce around the monthly RSI indicator, which is on the verge of oversold territory. From a fundamental perspective, there are a number of competing crosswinds impacting EURGBP: the current drama is centered around QE and Greece in the Eurozone, but as the UK’s May election nears, the political risk may shift North of the English channel.
While few forex traders are holding trades for months or years at a time, this type of analysis can provide valuable perspective to help frame shorter-term setups; for instance, a failure to bounce in the next week or two would suggest that the 15-year bullish trend line has been broken, opening the door for a bearish continuation toward .7235 (78.6% Fibonacci retracement) or .7000 (key psychological support) next. Conversely, traders should also consider the possibility that EURGBP could bounce off this strong trend line, which would indicate scope for a relatively large bounce toward the key .8000 level or higher later this year.
This research is for informational purposes and should not be construed as personal advice. Trading any financial market involves risk. Trading on leverage involves risk of losses greater than deposits.
Recommended Content
Editors’ Picks
EUR/USD steady below 1.0800 after US PCE meets expectations
EUR/USD remains depressed below 1.0800 after soft French inflation data, amid minimal volatility and thin liquidity on Good Friday. The pair barely reacted to US PCE inflation data, with the Greenback shedding some pips. Fed Chair Jerome Powell set to speak ahead of the weekly close.
GBP/USD hovers around 1.2620 in dull trading
GBP/USD trades sideways above 1.2600 amid a widespread holiday restraining action across financial markets. Investors took a long weekend ahead of critical United States employment data next week. Fed Chair Powell coming up next.
Gold price sits at all-time highs above $2,230
Gold price holds near a fresh all-time high at $2,236 in thinned trading amid the Easter Holiday. Most major world markets remain closed, although the United States published core PCE inflation, the Federal Reserve’s favorite inflation gauge.
Jito price could hit $6 as JTO coils up inside this bullish pattern
Jito (JTO) price has been on an uptrend since forming a local bottom in early January. Since then, JTO has revisited the key swing point formed in early December, suggesting the bulls’ intention to move higher.
Key events in developed markets next week
Next week, the main focus will be inflation and the labour market in the Eurozone. We expect services inflation to be impacted by the easter effect, while the unemployment rate to be unchanged.