EUR/GBP broke past resistance at 0.7939 only to encounter another batch of sellers at the 0.8100 major psychological level, pushing it back down to the 0.7930 and giving us a textbook break-and-retest setup to play with. And if we apply our Fibonacci tool, we can see that 0.7930 is just below the 61.8% retracement level. Another technical argument for 0.7930 holding as support is that there rising trend line, which has been tested on numerous occasions, not to mention stochastic currently signalling oversold conditions. The only worrying thing is that the moving averages look like they’re about to cross-over into downtrend mode since that may entice even more sellers to jump in.
The pair moved with great bearish momentum in order to try and smash support at 123.20. However, the support area was apparently well-defended, so the bearish onslaught was blunted and the pair began to trade sideways. In the process, a bearish pennant has formed. The pennant and its mast is a whopping 480-pips tall, so a downside breakout may have enough steam to move for the same amount. It also looks like the 100 SMA is acting as dynamic support, but do be careful since stochastic is about to reach oversold territory. Stochastic is still pointing down, though, so forex traders who are bearish on the pair may still be in control for now.
The bulls have been trying to push the pair past resistance at 1.6730, but keep getting beaten back. The bulls are relentless, though, so the pair has been making higher troughs. And if we connect these troughs, we get that there rising trend line. And as luck would have it, the pair is currently testing the trend line again, so y’all better get ready, especially if the trend line holds, since that may mean another possible swing higher in an attempt to break past 1.6730. As usual, just make sure to practice proper risk management should you find a trade based on this or any of the other charts, okay?
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To get the complete picture and avoid getting blindsided by economic data, you also have to do your fundamental analysis. Lucky for us, Pip Diddy fills us in on what we need to know about fundamentals with his Daily Forex Fundamentals.