EUR/GBP: Pulling Back Strongly In Downtrend

The EUR/GBP pair has bounced off formidable support situated at 0.7000 and risen higher, forming a loose a-b-c corrective pattern. This could signal that the pull-back may be nearing completion and that the pair could begin to resume its dominant down-trend. Alternatively a break higher forming a new v.short-term up-trend is also possible, given the pairs recent short-term bullishness. As I said in the last analysis piece on this pair the down-trend is very strong and expected to extend. “On the monthly chart there has been a breakout from a down-sloping channel, indicating a probable acceleration to the downside.” Therefore a clear move below 0.7000, including 50 points – so below 0.6950 – would probably confirm an extension lower, possible even as far down as historic support at 0.6665, although cautious traders might aim for 0.6800 instead. On the other hand if the pair breaks above the correction highs at 0.7170 – as it looks to be doing now, that could signal the start of a fledgling v.short-term trend higher, with 0.7215 providing an initial target at trend-line resistance, and then 0.7255.

EUR/GBP 4-Hour Chart

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