EUR/GBP Poised to Rally Further

EUR/GBP Poised to Rally Further

The EUR/GPB has been in a downward channel since making the near double top high at 0.9150 on December 3 and December 4. After 3 bearish waves, the pair made a low at 0.8848 near ST support at 0.8831 last week. Since this low, however, the EUR/GBP has made higher lows and higher highs even as it remains below the 50% Fibonacci retracement of the 3rd bearish wave (0.9047-0.8848) at 0.8958 on the daily chart. A breach of that level gives signal that this price action may actual turn into a rally rather than just mere consolidation after the low.

If you take another look at the EUR/GBP daily chart (from this article), you can recall the pair has broken the upper trendline of the LT downward channel from the 0.9410 high on October 13. Price needed to break the 0.8831 support level in order to resume that down trend. However, with price finding support before 0.8831 and now in a first bullish wave, the EUR/GBP is well poised to move higher. Resistance naturally lies at the 0.9000 whole number, large quarter point, and major psychological level. Before the whole number, price still has to take out 0.8958 50% Fibonacci level. After 0.9000, the November 12 high at 0.9062 is resistance to keep an eye on. A sustained break of this level gives the clue that the broken trendline formation is valid and a rally back towards the 0.9150 highs could come under assault. Only a break of 0.8831 reverses this bullish momentum.

As usual, trade what you see, not what I think.