FX TECHNICAL ANALYSIS MAJOR CROSS-RATES - FEATURED MARKET - EUR/GBP.
EUR/GBP recorded an all-time traded high at .9801 in December 2008, before undergoing a two-legged retreat to .8400 and .8069 in June 2009 and June 2010, interrupted by a recovery which topped out at .9411 and then left a lower high at .9150. Since bottoming at .8069 in June 2010, a prolonged recovery phase has occurred, this has taken the form of two distinct rallies (from .8069 to .8940, then from .8286 to .9083) but left a failed upwards break through the top of the (orange) projected bear channel, and a reversal towards the base of the shorter-term term (red) corrective bull channel is well under way. At this stage, most of the primary signals are still bullish. The (red, green & blue) 13, 52 & 260 week moving averages are positively aligned, with higher lows seen on MACD.
However, a possible head and shoulders top pattern has been forming over recent months above a neck-line connecting lows at .8609 & .8644. To avert the risk of this reversal pattern being completed and signalling a continued retreat from the recent top at .9083 we will need to see former key resistance at the October 2010 high of .8940 regained. Failure to do so, ahead of a breakdown through the .8609-.8644 area would warn of an impending breakdown from the (red) bull channel to retest the key 2011 & 2010 lows at .8286 & .8069, raising fears of the possibility of a deeper medium-term retreat towards the October 2008 higher low at .7695 which is close to the supporting downtrend line connecting the 2009 & 2010 bottoms at .8400 & .8069.
MAJOR TRENDS AND TARGETS FOR US DOLLAR MAJORS As at 08 September EUR/GBP GBP/JPY EUR/JPY EUR/CHF EUR/NOK EUR/SEK
Current level .8725
123.95 108.15 1.2130 7.5320 8.9340
Major trend Sideways Down Down Down Down Down
Major target
118.92 & 100 100 & 81.26
1.0000 & .8414 7.2175 & 7.1021 8.4430 & 8.2960
Trend change level .8286 / .9411 140.00 117.88 1.2822 7.9779 9.4253
74 FX TRADER MAGAZINE October - December 2011
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