EUR/GBP’s rally accelerated to as high as 0.8750 last week. Initial bias remains on the upside this week for 0.8786 resistance. The corrective fall from 0.9304 is likely completed after failing to take out 0.8332 support decisively. Break of 0.8786 would pave the wave for retesting 0.9304 high. On the downside, below 0.8674 minor support will turn intraday bias neutral first and bring retreat. But near term outlook will remain mildly bullish as long as 0.8529 resistance turned support holds.
In the bigger picture, price actions from 0.9304 are viewed as a medium term corrective pattern. The leg from 0.9304 should have completed after taking 0.8332 structural support. But it’s too early to say that larger rise from 0.6935 is resuming. Rejection from0.9304 will extend the consolidation with another falling leg. Meanwhile, firm break of 0.9304 will target 0.9799 (2008 high). In case of another decline, we’d expect strong support from 0.8116 cluster support (50% retracement of 0.6935 to 0.9304 at 0.8120) to contain downside and bring rebound.
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.
