EURGBP Correcting Lower And Breaking Support Levels

I suggested in my previous EURGBP analysis that as long as the market keeps on moving lower and there is no price based evidence to the contrary there is no hurry to close the short trades. I noted that an exception to this would be price hitting the 0.7022 support level which could well bounce the price higher and therefore is a logical target level. Price is in a downtrend and we should be looking to sell rallies as long as the approach works. However, once the 0.7022 target is hit the pair is at a major consolidation level and selling rallies might get trickier. The pair indeed hit the 0.7022 target level and rallied higher quite substantially. Selling rallies has definitely been trickier since then as price pretty much rocketed through the resistance level.

The pair is trading below a weekly low from February at 0.7340 after trying to penetrate the resistance area above the level. Now that EURUSD is reacting lower from a resistance EURGBP is moving lower as well. They key support levels are 0.7220 (weekly pivot candle high) and 0.7022 a historical support. Nearest resistance levels are at 0.7340 and 0.7405. Weekly close above the pivotal weekly candle high is a longer term bullish sign as this has not happened since October last year and could signal that the pair has a bottoming process ahead.



EURGBP, Daily
Run up higher was followed by a relatively narrow range candle in the upper Bollinger Bands two days ago. In yesterday’s trading price closed below previous day’s low suggesting a turn around. Stochastics is overbought and signalling a momentum change, thus supporting the bearish view. Today price has moved outside the rising trendline and March 18th daily high and 23.6% Fibonacci retracement level coinciding.



EURGBP, 240 min
Price has indeed broken the steeper trendline (grey line) and has now reached another that can be drawn by using the pivot points at A and B.  There is a resistance level at 0.7318 that was created when the pair found support at the now violated trendline (grey). Next intraday support is at 0.7260 while the 61.8% Fibonacci level suggests support at March 19th low at 0.7150 (point B).

Conclusion:
Long term: Weekly close above the pivotal weekly candle high is a longer term bullish sign as this has not happened since October last year and could signal that the pair has a bottoming process ahead. This could lead to a double bottom or to price creating a higher low. Time (and price action) will tell. The range between 0.7022 and 0.7105 is definitely worth keeping an eye on should the price move that low. Buy signals inside this range would indicate demand at those levels.
Short term: Price has violated 23.6% Fibonacci level and a support level created by a daily high and a secondary trendline. Therefore it makes sense to look to sell the rallies intraday. This would give us an opportunity to follow price action resistance levels identified in the above charts, especially 4h chart, and see if market is acting weakly or strongly. I would look at levels below 61.8% Fibonacci level as target as they should attract buyers.