(Chart courtesy of FX Solutions' FX AccuCharts. Price on 1st pane, Slow Stochastics on 2nd pane; uptrend line in green; downtrend line in red; chart patterns and ranges in yellow; 50-period simple moving average in light blue.)

3/27/2008 – EUR/GBP – As mentioned on a recent Chart of the Day, price action on the EUR/GBP daily chart, as shown, was in the beginning stages of forming yet another consolidation pattern. In this case, it was a flag formation. As of this writing, the past week or so has witnessed this pattern become a very well-formed flag, as outlined on the chart by the dotted yellow lines. All that is needed now is a breakout with follow-through, preferably to the upside. If this breakout occurs, the flag will have fulfilled its common role as a trend continuation pattern. Since the top of the flag represents a very long-term price high for the pair, there’s not much in the way of known resistance above the flag if a breakout indeed occurs. If, however, we are to measure the height of the consolidation upwards to project a concrete target, as is often done, the projected upside target would be in the region of 0.8075. In the event of a breakdown, however, clear support resides at the top line of the previous consolidation, around 0.7600.

James Chen

Chief Technical Analyst

FX Solutions

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