EURGBP: While the pair has resolved to the upside from its consolidation
activity following its run to the upside in early Sept'07, that resolution has
now exposed its May'2003 high at 0.7258.The pair has maintained its upside
offensive since testing and bouncing off the 0.6535 low in late Jan'07 though
setbacks in the form of corrective pullbacks were seen on such upmoves which are
normal in a trending environment. Based on EURGBP's performance and price action
since Jan'07 where every rally was met with a corrective pullback, its current
break higher through key resistance levels will suggest a consolidation to
pullback phase before attempting a run towards the 0.7258 level, which is the
location of its May'2003 high. This view remains in alignment with its daily and
weekly momentum indicators which are now toping out implying a temporary
reversal to unwind such conditions before a turn higher is seen again.
If this scenario plays out and the 0.7258 level is invalidated, its Jan'1994
low coming in at 0.7551 will then be targeted ahead of its Dec'1994 low at
0.7921.The prevailing medium term bullish structure remains supportive of this
view coupled with bullish monthly studies. On the other hand, initial setbacks
will aim at the 0.7108 level, its Dec'04 high and then its .382 Ret
(0.6894-0.7171 rally) at 0.7067 followed by its Sept 26'07 high/congestive top
at 0.7029/13.This level or even the 0.7029 level is expected to reverse roles
and provide support thereby turning the pair higher.
Figure 1: Daily Chart
Figure 2: Weekly Chart:
Charts provided by ProRealTime
On the whole, although the pair continues to hold near its recent highs
(0.7171), history of its price action and its topping out momentum indicators
remain suggestive of risk of consolidation to pullbacks in the short term while
maintaining its medium term outlook.
Mohammed Isah
Technical Strategist
m.isah@fxstrategy.com
www.fxtechstrategy.com
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