Forex Technical Update
- The EUR/GBP completed a zig zag (ABC) correction as it tested the top of a support zone, noted in Friday's update.
- Note also that the decline has failed to push the RSI below 30, a reflection of weak bears. If the RSI pushes back above 60, the attempted bearish momentum is killed.
- Now as we get ready for the first US session this week, the market is showing strong bullish price action but is still held under the 0.8750 resistance, which is just above 38.2% retracement and represents the support from last week, before it was cracked on Thursday.
- We are also testing a projected channel resistance.
- A break above 0.8750 opens up the bullish scenario towards 0.8885 (August high). It is not likely we can reach that in one swing, so the market may be attempting to fade this rally as we near the 50% retracement level (0.8770), and 200SMA (0.8784 at the moment). If the market shows support at the 0.8750 pivot, it may gain confidence for the bullish scenario in the short-term towards 61.8% retracement at 0.8800, then 0.8885.
- The daily chart shows that if the market breaks above 0.8885, we would actually create a double bottom, which opens up at least the 0.90 psychological whole level, as well as the 0.9040 and 0.9080 highs.
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Fan Yang CMT
Chief Technical Strategist