This is the updated chart of last Friday’s (July 10) double top pattern that we identified on the 1-hour forex chart for EUR/GBP. As you can see, price moved for about 50 pips to the downside before finding support at the 0.7110 handle. Now, the pair is consolidating into what looks like a bearish flag, so our primary directional bias is to the downside. Be careful, though, since there is a chance that price will pullback higher given that the current price area has seen very significant market interest in the past. Also, the 100 SMA is still above the 200 SMA and they are still far apart, so the overall trend is still up. Moreover, stochastic is currently in oversold territory, so forex traders bearish on the pair may be exhausted already.
As I discussed on my daily charts earlier, I was expecting price to pullback to the 100 SMA and rising trend line. And looks like price has finally pulled back, so has support formed? Perhaps, let me list the technical arguments for support.
First, the current price area at the 1.4900 major psychological level has seen some market interest in the recent past, so buyers may already be nibbling in. Second, price is sitting right smack on the 61.8% Fibonacci retracement level. Third, the moving averages are still in uptrend mode, with the 100 SMA acting as dynamic support. Third, the rising trend line has been respected a number of time in the past. And finally, stochastic is currently in the oversold area, but is beginning to point up already, so bulls may be taking control soon.
No, it’s not déjà vu. It just so happens that EUR/CAD and EUR/AUD are correlating nicely. EUR/CAD also broke through the 1.4100 major psychological level before finding resistance at the 1.4250 minor psychological level. After being beaten below the previous resistance area at the 1.4100 level, bulls began to fight back, using the 100 SMA as dynamic support. If we apply the Fibonacci tool, we can also see that the current price area around the 1.4070 handle lines up nicely with the 61.8% Fibonacci retracement level and has seen some market interest in the recent past too. In addition, the moving averages are indicating a healthy uptrend and the stochastic oscillator is already starting to point up after staying awhile in oversold territory.
As usual, make sure to practice proper risk management should you find a trade based on any of these charts.
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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.