EUR/GBP Price Forecast: Finds temporary support at the bottom of a range

EUR/GBP has touched down on support from the bottom of a range.
It is diverging with momentum and could be about to pull back.

EUR/GBP has extended its break out of a rising channel and fallen to the major support level at 0.8385, which lies at the bottom of a broader range for the pair.

EUR/GBP Daily Chart

The trend is bearish both in the short and medium-term, and given the principle that “the trend is your friend,” this means the odds favor more downside. A close below 0.8380 would provide confirmation of a continuation lower to a probable target at 0.8342, the 61.8% Fibonacci extrapolation of the prior down move.

At the same time, bears should be cautious. There are growing signs the EUR/GBP might be bottoming.

Firstly, the pair has reached a solid level of historic support at the base of its range.

Secondly, the most recent move down over the last few days has been accompanied by relatively weak momentum. Price is now showing a bullish divergence with the Moving Average Convergence Divergence (MACD) momentum indicator (red dashed lines). This happens when the price falls to a new low, but the momentum does not match. This is so if the MACD level at the August 29 bottom is compared to the MACD at the September 20 bottom. The price has declined over time, but the MACD has not. The divergence is a sign a pullback higher might form.

Thirdly, EUR/GBP is forming a bullish hammer candlestick on September 20 (today) and this could also suggest a near-term reversal is in the offing, however, this is provisional and depends on the final level of the day’s close.

(This story was corrected on September 20 at 15:38 GMT to say that EUR/GBP price is diverging with momentum indicator, not converging.)

Share: Feed news

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.