GBP/EUR Technicals Suggest Potential Reversal in Trend
The GBP/EUR pair is showing signs it could be changing its primary trend, and beginning a bearish cycle.
The currency pair, which had been in a strong up-trend saw dramatic weakness after the ECB suprised markets with tepid easing at its last rate meeting.
The evidence of a trend reversal is gathering pace on the daily chart, prognosticating yet more weakness to come.
First, we have a break below the 200 and 50-day moving averages - both of supreme importance to many institutional portfolio managers, then there is the reversal of peak and trough progression from up to down, and finally a confirmatory signal from MACD turning below it's zero-line, and therefore indicating the dawn of a more bearish trend.
The main obstacle to further weakness is the 50-week moving average, which is situated at 1.3775 – currently just below price – and is probably a contributing factor in slowing the sell-off at the moment.
Much depends on whether the pair reverses at the current level and starts to recover or breaks below the 50-week in fresh bear run. Althougn difficult to confirm - a break below the 1.3700 level might provide confirmation.
On balance, the overall technical situation points to further downside, with a break below the S2 monthly pivot at 1.3728 - including a 28-point confirmation gap – so below 1.3700 – confirming a bearish continuation, perhaps to a target at 1.3600, or even the October lows of 1.3561.
