Rally vs. Trendline: The EUR/GBP is coming off a 6-day rally after finding support at 0.7920. This latest upswing comes with some bullish momentum as the daily RSI reading had tagged 70, held above 40 and is now above 60 back towards 70 again. However, price action is up against some key resistance factors around the 0.81 psychological handle. The market has so far reacted with some supply a this level.
Resistance: The daily and the weekly chart shows a falling resistance going back to the July 1, 2011 high of 0.9082. Above 0.81, the previous resistance pivot is at 0.8120, which is coincident with the 200-day SMA. Right above that, the 0.8155 resistance pivot challenges the rally. Clearing above 0.8155 is a major accomplishment for the euro against the sterling.
Fibonacci retracements: The weekly chart shows some fibonacci retracement levels for a reversal scenario that comes with the break above the noted falling resistance. A strong retracement can be projected toward the 61.8% level at 0.8576. A conservative first target in the short-term could be the 38.2% retracement at 0.8263.
Fan Yang CMT is a forex trader, analyst, educator and Chief Technical Strategist for FXTimes – provider of Forex News, Analysis, Education, Videos, Charts, and other trading resources.
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