Is EUR-GBP Ready for a Bounce?

By: Mike Kulej

The Euro- British Pound has been going through a correction recently in relation to the primary price swing on the daily chart. That was a move from 0.8140 in August to 0.8940 in October. Since then, the price dropped to 0.8452 and it looks like the uptrend could resume soon.

If for this time scale the uptrend is the primary move, this recent sell off was a correction within this price swing. When the Fibonacci retracements are applied, we can see that EUR-GBP has reached the 62% level, a common reversal place for markets. In this example, it is at 0.8445, coinciding with the 100 SMA, which provides additional support. Chances are that this pair will bounce here.

The Stochastic indicator is very oversold, with reading as low as 6.6, which does not happen very often. This confirms the possibility of a low point at this level. Should the EUR-GBP indeed change direction here, the first likely objective for the rally is 0.8650, previous minor low, which could very easily turn into a new resistance. When, or if, that is broken, this pair should be able to test the high established in October.