- Daily and 4H: The EUR/GBP pair is nearing/testing a long-term declining resistance – from a large congestion pattern. You can see this more clearly in the weekly.
- The stochastic in both the Daily and 4H charts are overbought but has not shown signs of reversal yet. In anticipation, we have several possible scenarios, breakout or exhaustion. Exhaustion is a strong second attempt that might seem to break out, but turn into clear-out action.
- Its probably best to be prepared for both. The 0.9150 level is important. A strong break above suggests furter rally first to 0.94, then possibly 0.96 (see in weekly).
- Otherwise, it tops off and returns into the triangle seen in weekly. Then a break below the rising trendline seen in old in 4H chart confirms a decline to test the rising support of the triangle, near 0.8800.
- Weekly: The weekly shows the breakout scenario towards 0.96, with a possible first resistance at 0.94. The swing projection is shown with a blue line.
- This would mean the congestion period is over, and actually further bullish outlook could be anticipated.
- Otherwise, if congestion continues, the market declines from 0.9150 and heads towards 0.88 where it will again meet support. The swings are gradually smaller, but eventually will breakout of the triangle.
- A break below the rising support near 0.88 spells a swing projection to the 0.8550 area. A larger degree swing projection goes to the 0.81/0.8050 area, which we see in the left side of the screenshot, is a previous resistance area.
- Of course the more scenarios we speak of, the more likely the market will hit one of them. That is the idea to begin with, but as the market starts to show more clues, some scenarios become more dominant.
- For now, I would stalk the current rally towards 0.9150 and see if topping action occurs there.
- In the weekly, you may want to consider the fact that the SMA50 is way above the SMA200, and suggests the more likelihood of bullish continuation.
Fan Yang
Currency Analyst
Commodity Trading Advisor
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All screenshots are made from VT Trader 2.0 and are of actual market data at the time of the screenshot.