EUR/GBP Maintains Bearish Bias, Parity still a Remote Prospect at this Stage
The Euro to Pound exchange rate is showing a bearish bias on its charts.
The call comes despite renewed warnings from the analyst community that that pair will reach parity by the end of the year.
The weekly chart however suggests that a 1:1 exchange rate remains a remote prospect as it shows a bearish head and shoulders pattern forming.
This which bodes negative for the pair and signals a possible move down to 0.80 initially – probably even lower eventually.
A break below the neckline of the pattern would confirm a move down, with an initial target at 0.8000, followed by 0.7700, as calculated using the height of the H&S and extrapolating it lower from the neckline.
Then on the daily chart there are bearish overtures too, although not as clearly visible.
On balance, we see the natural way for the chart to evolve is down rather than up and against the grain of recent step declines. Currently the exchange rate is sandwiched between the 50-day moving average above and the 200-day moving average below.
Currently the exchange rate is sandwiched between the 50-day moving average above and the 200-day moving average below.
Moving averages don’t just provide an estimate of value or the trend, but also act as barriers to price evolution, or dynamic support and resistance levels as they are called.
There are short-term selling opportunities therefore down to the 200-day moving average at 0.8450 but at that level the rate will either bounce or consolidate most probably.
Then at 0.8400 there is the obstacle of the monthly pivot, which is also likely to impeded downside.
Nevertheless, a break below 0.8360 would probably confirm a clear break below that level and a move down to the neckline for the H&S at 0.8300.
A break below 0.8300, confirmed by a move below 0.8270 would see the selloff extend down to 0.8000.
