New Yearly Lows Likely For EUR/GBP
Technical Sentiment: Bearish
- Sterling maintained a neutral/slightly bearish bias in intraday trading on Thursday;
- Euro was sold heavily against all major counterparts following ECB Press Conference;
- EUR/GBP heading for 0.7765 low, with 0.7700 offering a secondary attraction level for sellers;
EUR/GBP shed 50 pips in the minutes following the ECB Press Conference, rejecting off a strong pivot line at 0.7863 in a strong statement that this downtrend has yet to exhaust.
This week price action has been stuck in a range between 0.7797 and 0.7863, but we are now seeing strong technical signals indicating EUR/GBP is ready to price in a fresh lower low. Two perfect rejections off the price pivot line at 0.7860 are culminating with a large Bearish Engulfing bar on the Daily timeframe, underlining Euro’s increasing weakness and the potential for future losses.
From a swing perspective, lower highs should now be followed by lower lows. On a break below 0.7800, EUR/GBP will immediately target September’s Low of 0.7765. Despite extreme oversold conditions displayed by Stochastic on Daily chart, we could also witness a fresh yearly low, 0.7000 being a likely target.
Risk towards the upside can be managed easily at this point. Stop losses are already accumulating above 0.7865, the main pivot level for last couple of weeks, making this area an initial short-term reversal point towards the upside. If EUR/GBP fails to dip below 0.7765 and bounces higher next week, market participants will assume a range (triangle) personality, making a reversal possible after all.