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- 4H and 1H: Yesterday we observed a break of an important support at the 0.8900 level. (Refer to Daily Technical Update 11.17.2009 EUR/GBP). The market has since rallied in the Asian/European sessions and is retesting the 0.8900 area. So far in the US session, the market is penetrating this powerline, and is around 0.8925 at the moment.
- This is 61.8% retracement, and further retracement is possible to the 78.6% level, which is 0.8950.
- The speed of the current rally however is alarming. There is more than just a correction going on.
- If the market reaches all the way back to 89.80, our bearish case should be invalidated, and a ranging mode can be established in the short-term roughly between 0.8850 and 0.9000 (more like 0.8830 and 0.8980).
- Despite the bullish momentum in the short-term, we should continue to be ready for topping action.
- The reward to risk ratio should be close to the previously estimated 1.9:1 with a target to 0.8700 and 2.5 ATRs as distance from powerline to maximum risk exposure.
Fan Yang
Currency Analyst,
Commodity Trading Advisor
