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EURGBP: While the pair has resolved to the upside from its consolidation activity following its run to the upside in early Sept'07, that resolution has now exposed its May'2003 high at 0.7258.The pair has maintained its upside offensive since testing and bouncing off the 0.6535 low in late Jan'07 though setbacks in the form of corrective pullbacks were seen on such upmoves which are normal in a trending environment. Based on EURGBP's performance and price action since Jan'07 where every rally was met with a corrective pullback, its current break higher through key resistance levels will suggest a consolidation to pullback phase before attempting a run towards the 0.7258 level, which is the location of its May'2003 high. This view remains in alignment with its daily and weekly momentum indicators which are now toping out implying a temporary reversal to unwind such conditions before a turn higher is seen again.
If this scenario plays out and the 0.7258 level is invalidated, its Jan'1994 low coming in at 0.7551 will then be targeted ahead of its Dec'1994 low at 0.7921.The prevailing medium term bullish structure remains supportive of this view coupled with bullish monthly studies. On the other hand, initial setbacks will aim at the 0.7108 level, its Dec'04 high and then its .382 Ret (0.6894-0.7171 rally) at 0.7067 followed by its Sept 26'07 high/congestive top at 0.7029/13.This level or even the 0.7029 level is expected to reverse roles and provide support thereby turning the pair higher.
Figure 1: Daily Chart
Figure 2: Weekly Chart:
Charts provided by ProRealTime
On the whole, although the pair continues to hold near its recent highs
(0.7171), history of its price action and its topping out momentum indicators
remain suggestive of risk of consolidation to pullbacks in the short term while
maintaining its medium term outlook.
Mohammed Isah
Technical Strategist
m.isah@fxstrategy.com
www.fxtechstrategy.com
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