Forex Technical Update
After a few days of consolidation to start the new year, the EUR/GBP fell sharply, breaking below the 2011 low at 0.8280. The decline touched 0.8263 before we see a strong 1H candle suggest a pullback or at least a sideways consolidation, especially now, as we end the US trading session. The RSI reading in the 1H chart fell below 30, and price was trading at the bottom bollinger band (3 standard deviations from 200 simple moving average). These are signs the market might need to take a breather before further bearish attempt.
The daily chart also shows the market at oversold condition with price action at the bottom bollinger band as well as the channel support. The RSI can be developing a bullish divergence as well. Considering such a strong preceding bearish attempt, any bullish outlook from here should be limited to at most 0.85, a previously broken support level that might act as resistance. 0.8420 could be a more conservative target.
To the downside, the weekly chart shows the next support area near 0.8140. A measured move seen in a weekly chart also targets 0.80. Unless the market manages to push above 0.85, these are the bearish targets for the start of 2012.