Buyers were overwhelmed by the sellers at the 0.7350 minor psychological level to such an extent that EUR/GBP managed to violate a well-respected trend line. Fortunately for forex traders who were bullish on the pair, price found support at the 0.7270 handle, a price area of significant market interest. Price then clawed its way back into the trend line and then some.
Now, price has gone back down again to test the trend line after making new highs. But will price be testing the trend line or try to make a break for it? Personally, I favor an upside move because the trend is healthy overall and the 100 SMA and 200 SMA are in uptrend mode. Also, stochastic is currently in oversold territory. But just in case price breaks through to the downside, forex traders should observe how price reacts to the 0.7270 handle.
After forming what looks like a head-and-shoulders pattern, price broke through and down the 190.90 handle with sufficient and convincing momentum. Now, the downward movement has stalled and it’s easy to see why – price us currently at the 189.90 handle, a price area of very significant interest in the recent past. Our directional bias is for an upside move because the moving averages are still in uptrend mode. Also, stochastic is currently pointing to potentially oversold conditions. The only thing which worries me is that price has been closing below the 100 SMA and 200 SMA. This indicates to me that seller interest on this pair is very strong.
Reversal alert! A rather rough-looking double top appears to have formed on the 1-hour chart for GBP/AUD. Unfortunately, I cannot say with conviction that the directional bias is to the downside, especially if it involves breaking through the area pattern‘s neckline since the neckline rests on the 1.9670 handle, a price area of very, very significant market interest. So make sure to practice proper risk management should you find a trade based on this chart.
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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.