Extending the breakout: The EUR/GBP has been strong since the 0.7756 July and 2012 low. Last week, it cleared above a declining trendline that went back to 2011 and its July high at of 0.9082. It has also pushed above the 200-day SMA for the first time since October 2011. In September and now again, the daily RSI popped above 70 for the first time since March 2011. These are signs that the EUR/GBP is turning bullish.
A break of 0.8155 opens up a pivot at 0.8220 in the short-term up to the 38.2% retracement of the 2011-2012 down turn, at 0.8260.
No signs of reversal: The 4H chart shows a persistent bullish mode with the RSI tagging 70, holding above 40, and kissing 70 again. Maybe the rally has decelerated, but no signs of reversal just yet. A break below 0.8120 would be necessary to form a short-term top, and then a break below 0.81 and the rising trendline has the potential to introduce a short-term bearish outlook away from the 0.8155 pivot.
Near-term Momentum: The 1H chart shows that momentum has been persistently bullish, but also shows that it is decelerating. If the 1H RSI falls under 40, with price falling under 0.8120, we would indeed be forming a near-term top. Until then, price action is still focused on 0.8155 with the threat to break it.
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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