(Chart courtesy of FX Solutions' FX AccuCharts. Price on 1st pane, Slow Stochastics on 2nd pane; horizontal support/resistance levels in yellow; uptrend lines in green; downtrend lines in red; chart patterns in white; 50-period simple moving average in light blue.)
6/08/2010 – EUR/GBP – Price action on EUR/GBP, a daily chart of which is shown, dropped down to key support in the important 0.8200 price region, a new 18-month low, before making a bounce as of Tuesday (6/08/2010) morning New York session. This occurs within the context of a steep and accelerated overall downtrend extending from the March highs. The steepness of this downtrend highlights the fact that the euro has been significantly more bearish against the dollar than sterling has in the past several months. While this is true, EUR/USD and GBP/USD are both currently entrenched in strong overall downtrends. Despite the noted bounce off 0.8200 support in EUR/GBP, this cross maintains a bearish tone in line with the steep prevailing downtrend. Considering this steep downtrend, upside resistance resides significantly in the 0.8400 price region, while any substantial breakdown below the noted 0.8200 support could potentially target further downside support in the key 0.8000 price region. This important level is not only a significant support/resistance and psychological level, but it also coincides with a 161.8% Fibonacci extension of the prior major downtrend run.
James Chen, CMT
Chief Technical Strategist
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