Stalking Pullback in the EUR/GBP

chart1

  • 4H: The EUR/GBP pair could not break below 0.8200. That was the central pivot of the previous triangle pattern. The inability shows the market is not bearish is still remains ranging in the short term.
  • However, if the market fails to rally above 0.83, it shows bearish bias and gives the pair a better chance of breaking below 0.82.
  • Also, the RSI should not break above 60 for this scenario.



chart2

  • Day: As a reminder, the daily shows the bearish scenario in a higher degree. Although the 4H chart shows ranging, the daily chart shows the RSI failing to break above 60 after it was tempered with 30, a bearish reading.
  • There is a swing projection to 0.80. There is also a swing projection suggested by the negative reversal towards 0.7850. What are the significance of these levels in the weekly chart?




chart3

  • Week: The weekly chart show the market near the oversold area, but developing a bullish divergence. In this case, a bullish divergence should be respected especially when the moving averages show a long-term bullish mode.
  • Looking at price, the market is hovering above the SMA200 (in gray). It is also at a powerline at 0.82.
  • The 0.80 could be the next support, as 0.7950 is the central pivot of the previous consolidation in July-2008.
  • The 0.7850 target however would suggest a bearish outlook if confirmed by a weak pullback.
  • The mantra “the trend is your friend” tells us that while we have short-term bearish outlooks, we need to be able to switch back to the bullish outlook very quickly. Before that, the market may spend sometime in consolidation. However, fundamentals sometimes dictate whether a reversal is going to be sharp so keep your eye on EU vs. UK debt and economic situations.
  • A break above 0.83 should bring up this ranging/bullish outlook.