EUR/GBP: Bulls Looking to Buy on Dips?

Matt Weller, CFA, CMT Faraday Research

As my colleague Fawad Razaqzada noted earlier today, the British pound has finally caught a small bid today after selling off sharply through the first three days of the week (see “Brexit-hit GBP/USD rebounds ahead of UK GDP and US CPI” for more). There is certainly some prospect of a bounce in GBP/USD, which is testing a critical long-term Fibonacci retracement, but we also wanted to a key make-or-break level for the recent rally in EUR/GBP.

Looking at the daily chart, EUR/GBP broke out to a fresh year-to-date high yesterday, eventually surging up to hit its highest level since last October near 0.9030 in this morning’s trade. That said, rates have now reversed to show a possible bearish “dark cloud cover” pattern in development, which could point to a near-term pullback. Such a move wouldn’t be particularly surprising, with the unit hitting the top of its 2-month bullish channel as well.

Technically speaking, the near-term horizontal levels to watch will be the Q4 2017 highs around 0.9030 and March’s previous-resistance-turned-support at 0.8970. Given the near-term bullish momentum, trend followers should be inclined to look for buying opportunities on any near-term dips toward 0.8970 support or the bottom of the recent channel in the mid-0.8900s. Only a break below the month’s low around 0.8855 would through the near-term bullish bias into doubt.

Author

Matt Weller, CFA, CMT

Faraday Research

Matthew is a former Senior Market Analyst at Forex.com whose research is regularly quoted in The Wall Street Journal, Bloomberg and Reuters. Based in the US, Matthew provides live trading recommendations during US market hours, c

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