EUR/GBP Eyes Higher Prices
EURGBP made a run to the upside the past week pushing through its 50/100 emas(first time following its failures in Aug,Sept & Oct this year)and breaking above its falling trendline established since July’06 to close the week at 0.6769.This is the highest weekly close since Sept 24’06 and also marks the second week of such gains following a rally off its recent lows at 0.6785/70(Sept’06/Oct’06 lows).
EURGBP rose sharply between Feb’06 and April’06 to a high of 0.7023 following its bottom (0.6609) in Jun’05 accompanied by a six-month sideways trading range which ultimately resolved to the upside in Mar’06.With a sell off from 0.7023 high holding and bouncing off the weekly 200 ema in May 14’06 resulting in a failed attempt on the upside(0.6959) in early July’06,EURGBP declined sharply through its major ema on both the daily and weekly charts to hit a low of 0.6719 taking out its Jun’06 low at 0.6752.It has since been trading below its major averages and has also seen lower level prices in Sept’06 at 0.6685 and in Oct’06 at 0.6670(lowest price since July’05) before its recent rally pushing it to a high of 0.6790.
Figure 1: Daily Chart
Figure 2: Weekly Chart
Furthermore,the cross as can be seen from the daily and weekly charts is poised for further upside gains. This view is supported by the fact that its current break to the upside off its Oct’06 lows was facilitated by a bullish divergence between price and MACD on the daily chart taking the momentum indicator above its zero line, a bullish sign. In addition, the weekly studies are now positive and pushing higher, a constructive indication that higher-level prices are expected. In such a situation, its horizontal resistance line/late Sept’06/Nov’06 highs now coinciding with its 200 ema at 0.6788/93 should be the immediate target with a clearance needed to pave the way for the cross to extend its upside gains towards 0.6816/29 levels, its Sept’06/Aug’06 highs. If a break and close above these levels are seen, further gains towards its long term falling trendline originating from April’06 coinciding with its July 27’06 high at 0.6860/61 zone should follow. On a penetration and hold above this zone, 0.6896, its .786 Ret of its July-Oct decline comes into play ahead of 0.6959/61 levels, its July’06 high and falling trendline since May’03.On the other hand, any weakness as a result of its recent upside gains should be initially contained by its 100 ema and broken falling tendline at 0.6753/46.Further weakness could see the cross targeting its Nov 10 & 13’06 lows at 0.6719/15 with a break below this zone required to put pressure on the current bullish outlook.
On the whole, having fought its way out of its recent lows, EURGBP has embarked on fresh upside incursions and now has its eyes on further upside gains in the days and weeks ahead.
Happy Trading
Mohammed Isah is an independent technical analyst,a professional trading instructor and mentor. He initially traded stocks and now primarily focuses on forex.He is an independent market analyst for Spencer Financial LLC.www.spencerfx.com. He produces the firm’s daily technical analysis research which is available at fxstreet,actionforex, forexfactory and www.tradingmarkets.com/fxtechnicalresearch.He can be contacted for enquiries at:misah@spencerfx.com
The information has been prepared for information purposes only. The document is not intended as personalized investment advice and does not constitute a recommendation to buy, sell or hold investments described herein. This information contained herein is derived from sources we believe to be reliable, but of which we have not independently verified. Spencer Financial LLC assumes no responsibilities for errors, inaccuracies or omissions in these materials, nor it shall be liable for damages arising out of any person’s reliance upon this information. Spencer Financial LLC does not warrant the accuracy or completeness of the information, text, graphics, links or other items contained within these materials. Spencer Financial LLC shall not be liable for any indirect, incidental, or consequential damages including without limitation losses, lost revenues or lost profits that may result from these materials. Opinions and estimates constitute our judgment and are subject to change without notice. Past performance is not indicative of future results