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EURGBP short to a 3-year and 8 months high of 0.7011 on Thursday breaking through its July'06 high to close at 0.7000, its highest price since Jan 06'04.This upside offensive is coming on the heels of a third-week of consecutive higher closes after failing at 0.6738(Sept 04'07 low) low before breaking through its major emas.
Figure 1: Daily Chart
With EURGBP's rally off the 0.5689/0.5736 zone, its May/Oct, 2000(Monthly chart) petering out at 0.7257 in May'03 and later collapsing to a low of 0.6542 in April'04,the cross has been trading in a descending triangle since its failure at the 0.7257 high before resolving to the upside mid-Sept'07.This pattern is formed by a lower horizontal line and a falling trendline.Although this has a bearish implication in terms of breakout direction, it sometimes resolves to the upside which is typical in EURGBP's case. The breakout price target stands at 0.7555 which is established by measuring the wider part of the range and projecting it from the breakout point. The above price objective should take weeks and even months to play out.
Figure 2: Weekly Chart
Figure 3: Monthly Chart
Having reignited its medium uptrend, EURGBP now looks to push prices higher initially towards its April'06 high at 0.7022 ahead of its dec'04 high at 0.7104 with a loss of there paving the way for a run at the 0.7257 level, its May'03 high. The weekly and monthly RSI and Stochastics are positive and advancing implying further strength.However, with overbought condition now a factor on the daily time frame, corrective weakness may be seen towards the 0.6932 level, which marks its Sept 19'07 low at first followed by its breakout point/.382 Ret (0.6738-0.7011 rally) at 0.6907/5.This is expected to reverse roles and provide support but if a turn below there occurs, its Mar 14'07/.50 Ret. at 0.6875/68 will be targeted.
On the whole, EURGBP has begun a fresh medium term upside journey having broken and closed above its monthly descending triangle.
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Mohammed Isah is a professional technical market analyst, mentor
and instructor. He initially traded stocks and now primarily focuses on forex.
He was former market analyst at fxinstructor.com and currently he is head of
research and technical strategist at www.fxtechstrategy.com, a website dedicated
to currency research. He can be contact at: m.isah@fxtechstrategy.com
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