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EUR/GBP 4H Chart 8/12/2012 10:00PM EDT

The EUR/GBP topped off last Monday (8/6) at 0.7962 and has slid to about 0.7830 by Friday (8/10). A few observations can be made in the 4H chart.
1) Price action has retraced 61.8% of the 0.7756 to 0.7962 rally from 7/23 to 8/6.
2) Price action has fallen below the rising trendline holding this rally, which can be categorized as some type of zig zag corrective rally against the higher degree mode, which is bearish (seen in the daily chart).
3) The 4H RSI has tagged 30, which shows a market able to regain bearish momentum.

This bearish momentum could be within the context of a range-bound market, or in the bearish continuation with the wind of the trend behind its back. If a pullback is held under 0.79, the bearish continuation case is strong, with 0.78 and 0.7756 as targets in the near and short-term in this coming week.

In the 1H chart, if the market pulls back and the RSI remains under 60, it will reflect maintenance of the bearish momentum started last week.

On the last note, the Daily chart shows a market that has been in the bearish mode. Price action showed respect to a declining trendline that started in June. The RSI failed to push above 60, showing maintenance of bearish momentum in this time-frame. With a push below 40, it can reflect the bearish continuation scenario.

Remember that there could be some demand near 0.77, which is a psychological support as well as the lows during the 2008 consolidation period.

EUR/GBP 1H Chart 8/12/2012 10:00PM EDT

EUR/GBP Daily Chart 8/12/2012 10:01PM EDT

Fan Yang CMT is a forex trader, analyst, educator and Chief Technical Strategist for FXTimes – provider of Forex News, Analysis, Education, Videos, Charts, and other trading resources.

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