EUR/GBP: 0.77 and 0.79 are the key levels to watch by Mary McNamara

I received a request over the w/e for my thoughts on the EUR/GBP. This isn’t a pair I usually watch and I have been trying to cut back on the number of pairs that I watch but I’ll happily review this pair.

 The email came with this analysis:

I have been watching the demise of the Euro against a few of the majors but what has caught my attention recently is the E/G and where price has currently parked itself, just above the 50% Fib level when drawing a H/L retracement from the low in 1999 to the high of 2008.

Also the current level has acted as both support in 2007 and 2012 with 2012 and present being a very definite double bottom.   All this suggests a retracement but given the fundamental argument of the Euro continuing to weaken, I have to wonder.

Price is well below the cloud and just above the monthly 200EMA although if Cable gets stronger it looks like price and 200EMA could converge, which last happened in 2006/7 when the Euro went up like a rocket.     I guess if we believe the old adage of what goes up etc, we could be looking at a break of the 50 level, in which case there is nothing to stop it until it hits the 61.8 or any of the round numbers in between.   The weekly cloud chart tends to confirm the monthly and the daily chart is also going South albeit with the expected retracements.

RSI and MFI both descending and below the 50 level and ADX also in a similar downward spiral.

Am interested in your thoughts.

EUR/GBP: my humble thoughts:

EUR/GBP monthly: the first thing I noticed when I looked at the monthly chart was how price seemed to be sitting right at the midpoint for price range for this currency pair. I drew in trend lines and see recent price action as forming up into a descending triangle with a base at 0.77. The 0.77 level also happens to be the deepest low since April 2008 and, also, the mid point for price range for the EUR/GBP pair (on my charts at least). I am also noticing that the current monthly candle, although yet to close, is bullish coloured and holding above the support of the monthly 200 EMA whereas the previous 6 monthly candle were bearish. This is giving the monthly chart a bit of a bullish ‘Triple Bottom’ appearance :

EGmonthly

E/G monthly + fibs: adding fibs to the chart confirms this observation. The 0.77 level is just below the 50% fib for the 1999-2008 bull move:

EGmonthlyE/G monthly Cloud: price is below the Cloud but getting some support from the monthly 200 EMA:

EGmonthlyCloud

Triangle breakdown target: any hold and close below the 0.77 level though would suggest a triangle breakdown. Technical theory can help to identify possible targets for such bearish moves. The height of this monthly triangle is 2,000 pips. Thus, any bearish follow through activity could be expected to extend by the same order of magnitude, that is, by 2,000 pips. A move of 2,000 pips below the 0.77 base would suggest an ultimate target of 0.57. There would be other profit targets along the way to this level with the 61.8% fib, at 0.725, and the 78.6% fib, near 0.66, being just two obvious targets:

EGmonthly

EUR/GBP weekly: the weekly chart shows this pair trading within a descending trading channel down towards the 0.77 support level. This is no great surprise though as the EUR index is trading within a similar channel:

E/G weekly:

EGweekly

EURX daily: this is also within a descending trading channel:

EURXdaily

E/G weekly Cloud: price is well below the weekly Cloud and thus some pull back here would not be out of order:

EGweeklyCloud

EUR/GBP daily: the daily chart shows this pair conforming to the descending trading channel. The top of the trading channel is about 230 pips above current price and may be a target if bullish momentum continues. The E/G is below the daily Cloud and there hasn’t been any recent bullish T/K cross:

E/G daily:

EGdaily

E/G daily Cloud: 

EGdailyCloud

EUR/GBP 4hr: the 4hr chart shows that this pair is currently still in an uptrend after bouncing up from the bottom trading channel trend line last week. It is currently struggling to get up and over the psychological 0.79 level which also happens to be the region of a couple of EMA levels. This recent bounce off support coincided with a move back up through the 4hr Cloud and the triggering of a ‘weak’ LONG signal from a T/K cross.

Price action is struggling at this 0.79 resistance though and I may be close to receiving a new TC signal to short. Price is currently under the resistance of the monthly pivot as well. Any bearish move from current price might target the intersection of the 50% fib level and the trading channel’s support trend line:

E/G 4hr:

EG4hr

E/G 4hr Cloud:

EG4hrCloud

Thoughts:

  • The EUR/GBP is trading within a bearish descending triangle pattern on the monthly chart time frame. It is trying to print a bullish monthly candle though, the first for 6 months, and trying for a bullish-reversal ‘Triple Bottom’.
  • The EUR/GBP is also trading within a descending trading channel on the daily chart time frame and is currently in an uptrend after a recent bounce up off the bottom of the channel.
  • Bullish clues: 0.79 is strong resistance and any new close and hold above this level would suggest bullish continuation. A possible bullish target would be the top of the trading channel; 240 pips above the 0.79 level.
  • Bearish clues: A failure to break above 0.79 would suggest a move back lower to further test the trading channel’s support trend line. This level intersects with the 50% fib and would be an obvious bearish target and is about 100 pips below current price.
  • 0.77 and any triangle breakdown: 0.77 is major support for the EUR/GBP as it represents the deepest low since April 2008 and also a mid point for price range for the EUR/GBP. This level is about 150 pips below current price. Any break and hold below the daily chart’s trading channel and the 50 % fib would suggest a move lower to test this 0.77 level. A close and hold below the 0.77 level would suggest a bearish triangle breakout. The bearish target for any such triangle breakdown move would be 0.57 with other fib level and whole number targets along the way. 
  • 0.79 and 0.77 seem to be the key levels to watch here. Some traders would prefer to wait and see confirmation of a breakout from these levels. I would expect price action might be choppy as it navigates and battles out this important 50% fib and support region.

 

 

The post EUR/GBP: 0.77 and 0.79 are the key levels to watch. appeared first on www.forextell.com.

Leave a Reply

Your email address will not be published.