EUR/GBP’s rebound from 0.8745 extended to 0.9032 last week but dropped sharply since then. The development suggests that such recovery is completed and fall from 0.9305 is resuming. Initial bias stays on the downside this week for 0.8754 first. Break will target 61.8% projection of 0.9305 to 0.8745 from 0.9032 at 0.8686. On the upside, break of 0.9032 is needed to confirm resumption of the rebound. Otherwise, risk will stay on the downside in near term.
In the bigger picture, there are various ways to interpret price actions from 0.9304 high. But after all, firm break of 0.9304/5 is needed to confirm up trend resumption. Otherwise, range trading will continue with risk of another fall. And in that case, EUR/GBP could have a retest on 0.8303. But we’d expect strong support from 0.8116 cluster support (50% retracement of 0.6935 to 0.9304 at 0.8120) to contain downside.
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 through 0.9799 to 100% projection of 0.5680 to 0.9799 from 0.6935 at 1.1054.
