EUR/GBP Forecast: Bearish exhaustion, Is BOE set to disappoint hawks?
|EUR/GBP ended yesterday with a Doji candle, which indicates bearish exhaustion, i.e. the sell-off from the high of 0.9306 may have run out steam. The Doji alone does not indicate trend reversals. A bullish follow through to yesterday's Doji would confirm bearish-to-bullish trend change.
Daily chart
Observations
- The rising trend line has been breached
- Doji candle
- The spot is trading between the 23.6% Fib and 38.2% Fib
- Stochastic [5,3,3] is oversold, signals the sell-off from 0.9306 may have run out of steam
- 5-day MA and 10-day MA are sloping downwards
- The 14-day RSI is bearish and yet to hit the oversold territory
View
- A re-test of the upward sloping 50-DMA seen at 0.9080 looks likely. Such a move could be short lived as the RSI is bearish and the Stochastic would be overbought by then. Only an end of the day close above 10-DMA would abort the bearish view.
- Bearish scenario: rejection at the rising trend line followed by a break below 0.8982 [Sep 12 low] could yield a quick fire drop to 0.8925 [38.2% Fib retracement].
BOE to sound less hawkish than expected?
Price action analysis indicates scope for a rally to 0.9080-0.91. Technicals could be leading the fundamentals here - BOE to disappoint hawks, sound less hawkish than expected...
Read: BoE preview: Rate hike talk alive, exhaustion likely in GBP/USD above 1.34
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