Stalking EUR/GBP as it Nears Resistance
Thursday, September 2, 2010
, Posted by Usman Ali Minhas at 8:17 AM
Stalking EUR/GBP as it Nears Resistance
- Day and 4H: The EUR/GBP rallied past the 0.8320 target set in the August 31st EUR/GBP update. The surge is heading up against resistance at the 61.8% retracement level at 0.8380.
- It is at 50% at the moment and also testing a declining trendline.
- Also note that the 0.8400 level is an important powerline. This is also apparent in the weekly chart below.
- The RSI in the day chart is threatening to break 60, which means it is breaking the bearish momentum.
- The RSI in the 4H chart is in the overbought area, which is a bullish sign.
- If subsequent declines fail to break below 40. The market may have turned bullish.
- However, for now, resistace is just ahead at 0.840 area. A decline from there can be targetted to 0.8250. It should not be lower because the mode has turned at least ranging if not bullish. A return to the bearish mode is confirmed with a break below 0.82 (equilibrium area of the triangle patter in 4H chart).
- Week: The weekly chart shows a bullish divergence, but if the market tops off before 0.8450 there is a negative reversal which suggests a swing projection either towards the previous low, or lower if the topping action occurs at 0.84.
- The moving averages in the weekly show that the EUR/GBP is in a long long-term bullish trend, but has been in a short-long-term bearish mode since 2009. Was the decline since 2009, a 2-swing correction?
- The second swing is projected to 0.80, and should be so because it would be a C wave. C should be equal or longer than A, unless we are in some conestiong (triangle) pattern.
- Here, it is also apparent that 0.84 is an important resistance. If you still agree with the bearish outlook towards 0.80, look for topping near 0.84. It should not break above 0.8450 (or there would be a double bottom), and a decline is conservatively to 0.8250 in the short-term, but possibly 0.80 in the intermediate term. In this scenario, you should be able to see reward to resistance at best 3:1 but likely lower.
