EUR/GBP 360 Pips Drop in Price is Emerging in the Nearest Time

EUR/GBP 360 Pips Drop in Price is Emerging in the Nearest Time

Published: November 30th, 2020

Monthly chart

EUR/GBP Monthly Technical Analysis 30 Nov 2020

Starting to look at the price action since the end of 2016, it is clear, that on the monthly chart, an extremely strong resistance has been formed near 0.9225. This resistance has been rejected for 5 consecutive times, with the last rejection occurred in September this year. Considering that the price is near the top, and sellers have been defending the 0.9225 resistance so many times, it would be reasonable to assume the trend reversal or a pullback should take place in the very near future.

This downside move might take the price down to 0.8591, which is a 38.2% Fibonacci retracement level. The reason this particular Fibonacci level was chosen, is because it corresponds to the simple uptrend trendline as well as the average-price downtrend trendline. Considering the crossing time of all these indicators, it might take one or two weeks for the EUR/GBP to move down by a huge 360 pips.

3-Day chart

EUR/GBP 3-Day Technical Analysis 30 Nov 2020

The 3-day chart goes to show, that today’s price has cleanly rejected the 38.2% Fibonacci retracement level at 0.9000, which is key psychological resistance. Simultaneously, EUR/GBP bounced off the uptrend trendline, which is currently acting as the resistance. Such a precise rejection of the 0.9000 resistance once again implies bearish domination. It also might suggest, that bears are starting to get in the EUR/GBP, for the medium to long term. On this chart, the previously shown downside target at 0.8591, almost exactly corresponds to the 88.6% retracement level, which is located at 0.8571. Perhaps 0.8570 - 0.8590 will be acting as a very strong demand zone when/if reached.

16-Hour chart

EUR/GBP 16-Hour Technical Analysis 30 Nov 2020

On the 16-hour chart, it can be seen that the ascending channel was broken, suggesting further price decline. Today, EUR/GBP has reached and rejected the lower trendline of the ascending channel and rejected it along with the simple downtrend trendline. It seems like it was a perfect selling opportunity and as long as the price remains below 0.9000, sellers will remain in full control.

The width of the ascending channel was 346 pips, which is 3.73% on the EUR/GBP. If we apply the same distance after the breakout of the channel, it can be seen that price might travel towards the 0.8591 level, which is exactly where the downside target based on Fibonacci is located.

4-Hour chart

EUR/GBP 4-Hour Technical Analysis 30 Nov 2020

Yet again the rejection of the resistance took place today. This time it was the top of the descending channel. At the same time, the price failed to break above the 200 Exponential Moving Average, which is also acting as the resistance. Besides, the average-price uptrend trendline was also respected by the buyers, while the price failed to break above it.

All these facts are strongly in favor of the strong downtrend. On this chart yet another Fibs was used, which was applied to the corrective wave up after the price broke below the 200 EMA. It shows that 427.2% Fibs corresponds to the previously shown 38.2% Fibs at 0.8591.

1-Hour chart

EUR/GBP 1-Hour Technical Analysis 30 Nov 2020

On the hourly chart, the price has rejected the 50% Fibonacci support at 0.8945. This might result in a short term consolidation, potentially bridging EUR/GBP towards the nearest resistance located at 0.8958 and confirmed by 38.2% Fibs. Perhaps this will provide yet another good risk/reward opportunity, although sellers could be waiting for the final confirmation. This confirmation might be the break below the uptrend trendline and the 200 EMA. When/if this occurs, selling pressure is likely to increase substantially, wrestling in a fast downtrend for EUR/GBP.

Summary

EUR/GBP rejecting all possible resistance indicators, which were observed on 5 different timeframes. This shows, that the probability of the downtrend remains very high. As long as the 0.9000 resistance is respected, EUR/GBP should be moving down.

Downside targets

The critical support and the potential downside target is located at 0.8591. It is confirmed by 3 different Fibonacci retracement levels as well as the long-term uptrend trendline and the average-price downtrend trendline.

Probability of an uptrend

As per the hourly chart, a break above 0.8974 resistance might start kicking out the sellers. Although only 1h and/or 4h break and close above 0.9000 will invalidate bearish outlook, in which case EUR/GBP will be expected to continue trending up.

Support: 0.8945, 0.8591

Resistance: 0.8958, 0.8974, 0.9000

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