Good Time to Look at the EUR/GBP Buying Opportunity

Good Time to Look at the EUR/GBP Buying Opportunity

Published: June 9th, 2020

The recent volatility in forex has left many traders unclear about the future behaviour of the currency market. Whether to expect the volatility to get lower or maybe volatility will increase even further? It is hard to give a distinctive answer to this question, but one thing is clear, market will continue to move. EUR/GBP is one amongst most currency pairs which experienced heavy volatility during past months, and from what it seems, it is likely to continue, at least in the nearest future. Especially considering the most recent 4-day candle, where price has moved down quite strongly.

4-Day chart

EUR/GBP 4-Day Technical Analysis 9 June 2020

The 4-hour chart shows how price broke the downtrend trendline under extreme volatility, which hasn’t been seen for a very long time. In fact, the price has reached a 133-months high, while hitting 0.9500 psychological resistance level. But then price corrected as sharply as it has risen, and went back to the downtrend trendline. EUR/GBP has rejected the 200 Exponential Moving Average, suggesting that the upside potential is still there.

Based on two Fibonacci retracement levels, applied to the December 13, 2019 - March 19, 2020, and March 3 - March 19 waves up, we can see key support and resistance levels. The support is seen at 0.8720, which is confirmed by 61.8% and 88.6% Fibonacci retracement levels. On the other side, the resistance is seen near 0.9165 area, which is confirmed by 23.6% and 38.2% Fibonacci retracement levels. The resistance is obviously the potential upside target, where price might be heading this and next week. But let’s get more facts as to why the probability is in favour of the uptrend continuation.

16-Hour chart

EUR/GBP 16-Hour Technical Analysis 9 June 2020

On the 16-hour chart, price continues to reject the uptrend trendline, along with the 200 EMA, which occurred back on April 14. On June 2, there was a clean bounce off the 50% Fibonacci retracement level, at 0.8863. Price continued to consolidate for a week and today it approached the Fibs support once again. But what is more important, is the clear rejection of the uptrend trendline. While it is possible that EUR/GBP will produce the spike below the trendline, it is still a very attractive demand zone for buyers. At this stage only daily break and close below the 200 EMA could invalidate bullish pattern and send price down to the previous level of support at 0.8621.

4-Hour chart

EUR/GBP 4-Hour Technical Analysis 9 June 2020

Yet again we see a rejection of the 200 Exponential Moving Average, this time on the 4-hour chart. This is another confirmation of the bullish domination overall, especially considering that EUR/GBP is currently trading at the previous resistance zone. Now it has become the support and obviously spikes down could be expected in order to kick out all the stop losses of the buyers.

On this chart, we have applied another Fibonacci retracement level, to the corrective wave down after breaking the 0.8860 resistance area. The 161.8% Fibs corresponds to the previously mentioned resistance area at 0.9160, making the potential target, or in other worlds a profit-taking zone, between 0.9156 - 0.9164.

1-Hour chart

EUR/GBP 1-Hour Technical Analysis 9 June 2020

Finally, on the 1-hour chart, the RSI oscillator has already formed a bullish divergence, because the price went below the previously made low, but the RSI made quite an opposite, it produced a new higher high and higher low. Maybe we are witnessing the starting point of a strong upside wave towards the 0.6160 resistance area because it also corresponds to the uptrend resistance trendline. At the same time, the trendline suggests that the upside target could be reached within just one trading week.

Summary

EUR/GBP is trading at the extremely attractive demand zone, where bulls have a strong chance of winning the battle for the trend. If this will be the case, EUR/GBP is expected to increase by 280 pips within just one trading week.

Upside targets

As per the 4-day and 4-hour charts, the upside target is seen near 0.9160 area, which is confirmed by three different Fibonacci retracement levels.

Probability of a downtrend

There is strong support at the 0.8873 level, where price has cleanly rejected the 200 EMA on the 4-hour chart. It is possible that there will be price spikes below this support, although only Daily break and close lower will invalidate bullish outlook and EUR/GBP trend could start changing from bullish to bearish.

Support: 0.8875, 0.8815

Resistance: 0.9055, 0.9155

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