EUR/GBP has been kind to bulls of late, and the intraday trend remains strong. Yet caution is required on the daily chart given the extended nature of price action.

As traders we need to have a bullish or bearish bias. Yet stating one without considering a time horizon is of little use, given the fractal nature of markets. And a good example of this is on EUR/GBP which could provide two opposing views depending on your timeframe.

On the four-hour chart we can see a strong bullish trend with a series of higher lows and shallow pullbacks. Moreover, without immediate signs of a top then we could assume the trend is to continue higher and head towards the 0.8768 high. Grated, RSI is ‘overbought’, yet this is exactly where we’d expect it with strong momentum. And the MACD and signal line have converged, yet overall both indicators point higher and there are no signs of a bearish divergence.

Prices are currently supported by the 8 period eMA and printed a potential swing low. From here traders could drop to a lower timeframe and seek bullish continuation patterns ahead of the weekend, until signs of weakness materialise. However, we urge caution as we approach the weekend given the extended nature of price action on the daily timeframe.

As of yesterday’s close, EUR/GBP closed higher for the 9th consecutive session (an event not seen since 2008 highs) and has had its best 9-day run since 2017. Furthermore. a small bearish hammer has appeared at the top of the Keltner band, so we’d prefer to seek a retracement before entering on the daily timeframe. Keep in mind we’re not saying it cannot go higher from here. But given we’re approaching the weekend after such a strong run, traders may want to book profits. But, more importantly, the reward to risk if less favourable at current levels given its close proximity to the 0.8768 high. Overall, we expect EUR/GBP to break higher and retest the 0.8840 high.

CFD and forex trading are leveraged products and can result in losses that exceed your deposits. They may not be suitable for everyone. Ensure you fully understand the risks. From time to time, City Index Limited’s (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material. As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed

Analysis feed

Latest Forex Analysis

Editors’ Picks

EUR/USD: Under pressure below 1.1245 while consolidating Dollar's resurgence

EUR/USD dropped from 1.1260 to just above 1.1200 overnight. The markets continued to price 31bp of easing at the 31st July meeting though Fed funds futures for 2020 rose about 3bp in implied yield.

EUR/USD News

GBP/USD: Recovery underway as traders await UK CPI for fresh direction

A minor correction in the US dollar across its main competitors appear to prompt a recovery in GBP/USD from 27-month lows, as the rates hold above the 1.24 handle ahead of the UK CPI data. 

GBP/USD News

USD/JPY rejected at 200-hour MA amid losses in Asian equities

USD/JPY is currently trading near 108.15, having faced rejection at the 200-hour moving average of 108.33 earlier today. The JPY is bid, possibly due to losses in equities. Also, Fitch Ratings' affirmation of Japan's rating at 'A' buoys the Yen.

USD/JPY News

UK CPI Preview: Brexit above all else

The monthly change in the consumer price index is expected to be flat in June down from 0.3% in May. The annual rate is predicted to be unchanged at 2 %. The core CPI rate is forecast to be flat in June, after gaining 0.2% in April.

Read more

Gold: Bulls are in the safe-zone, but are barely holding on

The 1400 psychological level is holding up which is just as well for the bulls, as a couple of dollars, a break of the 23.6% Fibo of the latest swing lows and highs could open up an onslaught to the downside.

Gold News

Majors

Cryptocurrencies

Signatures