EUR/GBP stayed in sideway trading last week and near term outlook is a bit mixed. We’ll stay neutral for the moment and monitor the development. But after all, there is no change in the view that price action from 0.9304 are forming a corrective pattern. Such pattern would extend in near term.
Initial bias in EUR/GBP remains neutral this week first. On the downside, below 0.8404 will turn focus back to 0.8303 low. Break there will extend the whole corrective pattern from 0.9304. In that case, we’d expect strong support from 0.8116 to contain downside and bring rebound. On the upside, above 0.8529 will resume the rebound from 0.8312 towards 0.8786 resistance.
In the bigger picture, price actions from 0.9304 are viewed as a medium term corrective pattern. In case of deeper fall, we’d expect strong support from 0.8116 cluster support (50% retracement of 0.6935 to 0.9304 at 0.8120) to contain downside. Rise from 0.6935 (2015 low) will resume at a later stage to 0.9799 (2008 high). However, sustained break of 0.8116 could bring deeper decline to next key support level at 0.7564 before the correction completes.
In the long term picture, firstly, price action from 0.9799 (2008 high) is seen as a long term corrective pattern and should have completed at 0.6935 (2015 low). Secondly, rise from 0.6935 is likely resuming up trend from 0.5680 (2000 low). Thirdly, this is supported by the impulsive structure of the rise from 0.6935 to 0.9304. Hence, after the correction from 0.9304 completes, we’d expect another medium term up trend to target 0.9799 high and above.
