Following up with the previous update, the EUR/GBP has reached the 0.7960 projection. The 0.7950-0.7960 area was seen as support, as it included a previous resistance pivot, and more importantly a rising trendline going back to August, seen more clearly in the daily chart.
In the 4H chart, we see a break below the rising trendline. Another key signal is the RSI tagging 30, a show of bearish momentum, although in the near-term it could be a sign of oversold conditions, and invite some brief corrective rally as the market fights off the trendline break. If the 4H RSI can hold below 60, preferably below 50, we would see new bearish momentum developing.
The bearish scenario opens up the 0.7755 2012-low seen in the daily chart, though we should be sure it can clear 0.7895 (61.8% retracement) to consider the low.
Bullish scenario: To the upside, a break above 0.8022/0.8025 should refocus the pair to the upside, especially if the RSI in the 4H chart rallies above 60. At that point the market is bullish to sideways at best, not bearish. However, the bullish outlook is at the moment limited by a key declining trendline that goes back to June 2011.
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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