EUR/GBP Weekly Outlook

By Roger Baettig | February 26 2011 3:34 PM

EUR/GBP staged a strong rebound last week and the break of 0.8528 resistance indicates that fall from 0.8671 is finished with three waves down to 0.8354 already. Though, EUR/GBP then retreated after making a temporary top at 0.8592. Initial bias is neutral this week and some consolidations would be seen first. But another rise will remain in favor as long as 0.8470 minor support holds. Above 0.8592 will target 0.8671. Nevertheless, below 0.8470 minor support will flip bias back to the downside for 0.8354 support and below. Also, note that recent price actions from 0.8333 are possibly in form of expanding triangle. Price actions would likely remain choppy before a breakout.

In the bigger picture, current development revives that case that rebound from 0.8067 has finished with three waves up to 0.8940 after hitting medium term trend line resistance. The development indicates that whole fall from 2008 high of 0.9799, which is treated a correction to the larger up trend, is not finished yet. Another low below 0.8067 could be seen ahead. Nevertheless, we'd continue to look for reversal signal inside 0.7693/8186 support zone.

In the long term picture, long term up trend from 2000 low of 0.5680 shouldn't be over yet and the choppy fall from 2008 high of 0.9799 should be a correction only. We'd expect such correction to be contained by 0.7963/0.8186 support zone and bring up trend resumption. Rise from 0.5680 is still expected to extend beyond 0.9799 high eventually.

EUR/GBP