Hi everyone!
Traditionally, I make an analysis of the euro/pound par on Friday. In today's two previous articles on the euro/dollar and pound/dollar pairs, I analyzed the results of yesterday's ECB meeting, the market reaction, and the main risks for the UK economy. For this reason, in this article, I will focus mainly on the technical analysis of EUR/GBP. Let's look at the weekly chart.
Weekly
Despite the fact that the euro/pound finished last week near the Ichimoku Cloud, the bears were not ready to give up. As seen on the chart, the pair has been trading in a bearish channel during this week. Sellers have even tried to push the price below the Ichimoku Cloud. Thus, they will do everything possible to end the week near the cloud. Some sellers will try to complete the week near the indicator, while others, on the contrary, will try to push the price down. Judging by technical indicators, there is a strong resistance area of 0.8581-0.8617. At the first level, the highest level of last week was located. The bulls' attempts to break through the resistance level of 0.8581 only led to a false breakout.
The support level indicates last week's lows as trading was carried out at 0.8487. The attempts of bears to push the pair below this level were also unsuccessful. Given the technical outlook on the weekly chart, the bullish trend is possible only after a breakout of the resistance level of 0.8617 and the 200 exponential moving average, which is located at this level. Bears have a more difficult task. They need to push the price to all previously passed indicators: 50 moving average, the Tenkan, and Kijun lines. Currently, the pair is n the correction phase. After a decline to 0.9216-0.8201, the pair retreated to the Fibonacci level of 38.2 which shows a bearish trend. Thus, the EUR/GBP pair is in a downtrend channel. It is also confirmed by the pink resistance line. Attempts to break through this line were also unsuccessful.
Daily
Yesterday's daily candlestick is very similar to the one that was formed for the EUR/GBP pair. After a rise to 0.8590, there was a sharp downward reversal to 0.8485. Apparently, this is a strong technical level as it has stopped yesterday's fall but also facilitated today's growth. If the euro/pound pair continues to rise, it will face resistance near the Tenkan red line, which runs at 0.8538. The pair is trading near 0.8517. Bulls and bears are likely to tussle for the closing price of the day and week near the psychologically important level of 0.8500. Given trader's disappointment with the ECB's rhetoric, as well as yesterday's bearish candlestick with a long upper shadow, the likelihood of a decline is high. It is better to wait for the convergence with the Tenkan line. After that, I would advise you to monitor bearish candlestick patterns on the weekly or smaller charts. If they appear, it will be a sell signal.
Have a wonderful weekend!
