EURGBP signals move to the downside
USD Index – The morning rally was reversed at the 261.8% extension level of 96.64 (from 95.39-95.87). Although we have not seen a full retest of the breakout level, dollar buyers are starting to re-emerge.
The only USD-based currency pair that looks to buck this trend is GBPUSD. The pair is looking exhausted and, with higher lows, is possibly forming a bullish ascending-triangle pattern.
For this reason, and others, our focus now turns to EURGBP.
The EURGBP monthly chart has clearly broken the corrective channel formation to the upside. We are trading at the highest level in 33 months.
Signals are now overbought and there is scope for a correction lower. Prime support is at 0.8125. This is a retest of the breakout and an area that has been pivotal since 2008.
Monthly EURGBP breaking through corrective channel formation
Weekly chart indicating possible downside move
Taking the widest part of the wedge and extended from the breakout gives us a measured move of 0.8583 which has been achieved. Yesterday we posted a DeMark 9 count. This highlights that we should see at least a correction lower within the next four days. We are at overbought extremes.
Overbought extremes on the daily EURGBP chart
With this being close to the previous low, we could bounce here and produce a descending-triangle formation.
One-hour EURGBP stalling at Ichimoku Cloud
Intraday targets could be fuelled by impulsive move lower
Entry: short at 0.8554. Selling again at 0.8666 or a break of 0.8507.
Stop: medium- and short-term call so wider stop. 50 pips combined.
Target: short term (2-3 sessions) is 0.8320. Medium term looking for 0.8125 and possibly the start of the wedge at 0.8000.
— Edited by Martin O'Rourke
Non-independent investment research disclaimer applies. Read more