EUR/GBP Remains Bearish; Eyes 2012’s Low

Technical Sentiment: Bearish

Key Takeaways

• Ifo German Business Climate Index fell to 104.7;
• Draghi acknowledged euro’s current level as being in line with Europe’s Monetary-Policy path;
• EUR/GBP seeks lower lows, targeting 0.7782 and 0.7754.

After a failed rally attempt on Tuesday, which ended up re-testing 0.7889, EUR/GBP sell-off resumed at its usual pace.

Technical Analysis

EUR/GBP has been trending lower since 10^th September, when a large Bearish Engulfing Bar marked the end of a corrective phase. Towards the end of last week, EUR/GBP went on to confirm the validity of the main downtrend, with a solid break below 0.7889, ultimately pricing a fresh Lower Low of 0.7809.

Although price remains contained within last week’s boundaries, multiple signals confirm that bearish pressure remains dominant. Tuesday’s resistance re-test was followed by a swift rejection, forming another Bearish Engulfing Bar on the Daily timeframe. Although Stochastic is entering oversold territory, a more serious bounce is unlikely until traders hit their desired targets.

A break below 0.7809 will pave the way for more losses down to 0.7782 (61.8% Fibonacci retracement from 0.6535 up to 0.9801), quickly followed by 2012’s Low at 0.7753. A dramatic sell-off acceleration, below 0.7000 / 0.7750, lacks the necessary economic triggers at this point, consequently a consolidation period should begin once these support levels will be reached.

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Prepared by Alex Z., Chief Currency Strategist at Capital Trust Markets