EURGBP - Focus back on downside - .7744 this week?

The weakness of the bounce from July’s low was signalled by an end to a sequence of two up weeks last week with renewed selling pressure. This reversal of sentiment occurred after the market has recovered almost exactly half of the fall from June’s top and led to four negative daily performances in a row. In addition, momentum has turned and there has been a break of trend of higher daily lows. These factors are all negative and although signals are approaching oversold extremes we now look for rallies to be temporary and limited. In view of this our call is Bearish below .7936. The immediate objective is .7782, the open from three weeks ago, with a move below that point targeting .7744, a pullback of half of the 2000-08 rise (see quarterly view), or even .7694.

The risk to this call is that selling pressure is weaker than currently assessed. This would be confirmed by a move above .7936, last Wednesday’s open, with renewed demand then focusing on .7964, last week's top, or even .8003, a 62 percent correction of the fall from June’s top.