EUR/GBP Weekly Outlook

By IBTimes Staff Reporter | February 14 2010 10:08 AM

EUR/GBP's rebound from 0.8601 was a bit stronger than expected and extended to as high as 0.8841 last week. Nevertheless, the cross failed to take out 55 days EMA. Moreover the sharp fall from 0.8841 left the recovery from 0.8601 in three wave corrective structure and thus indicates that recent decline is not completed yet. Initial bias is on the downside this week for 0.8601 support first. Break there will bring fall resumption towards 0.8399 low next. On the upside, above 0.8725 minor resistance will turn intraday bias neutral and bring recovery. But we'd continue to favor downside as long as 0.8841 resistance holds.

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In the bigger picture, price actions from 0.9799 are treated as consolidation in the long term rally, with first leg completed at 0.8399, second leg at 0.9410. Fall from 0.9410 is treated as the third leg of the consolidation and might still be in progress for 0.8399 low and possibly further to 0.7693/0.8186 support zone, with 100% projection of 0.9799 to 0.8399 from 0.9410 at 0.8010 in between. On the upside, break of 0.8841 will suggest that EUR/GBP is developing into sideway triangle consolidation instead of a deep correction. After all, note that we'd expect long term up trend to resume for another high above 0.9799 eventually after completing the current medium term consolidation.

In the long term picture, current development suggests correction from 0.9799 is still in progress and the long term up trend from 2000 low of 0.5680 is not ready to resume yet. Nevertheless, correction from 0.9799 is expected to be contained by 0.7963/0.8186 support zone and bring up trend resumption. Rise from 0.5680 is still expected to continue to 261.8% projection of 0.5680 to 0.7258 from 0.6535 at 1.0666 eventually.

EUR/GBP