EUR/GBP daily trend was bearish until February when price touched 0.8158, the 61.8% Fibonacci retracement on the 2012-2013 uptrend. In the first half of March a secondary bullish signal appeared when the push towards 0.8400 helped establish a higher swing high. In the medium to long term, this underlines the weakness behind the recent bearish trend and that a larger correction or even a change to a large bullish trend is very likely. Fortunately for us, the technical landscape offers more then a few hints as to what can come next and which are the most important levels to watch right now.
Technical Analysis
Coupling Elliot Wave A-B-C retracement analysis with Fibonacci levels, the first push towards 0.8400 and 38.2% Fibonacci retracement level is the first corrective wave (A). (B) marks the search for a higher low, and 0.8249 is a very good candidate for this low. The support confluence in this area includes 61.8% retracement from 0.8157 to 0.8400, the 50-day Moving Average and the previous resistance trendline which is now offering support for the pair.
On the 4H chart, what looks like a bullish engulfing price action pattern can further confirm this bullish scenario if price will manage to close above 0.8282, the 200 Simple Moving Average, at the end of the European session or later in the US session.
The first short term resistance area can be found between 0.8327 and 0.8347. The medium to long term outlook for a bullish continuation targets 0.8400 and ultimately a new higher swing high, which could form at 50% retracement level and pivot zone 0.8642 or at 61.8% retracement level 0.8535.
If EUR/GBP fails to hold above the 0.8249 level for any reason, all uptrend scenarios will be invalidated, leading to another test of the main support at 0.8158.
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Prepared by Alexandru Z., Chief Currency Strategist at Capital Trust Markets
