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EUR/GBP Weekly Chart Pattern Says Brace for Extreme Volatility

By:
James Hyerczyk
Published: May 21, 2016, 22:24 UTC

Last week’s steep drop by the EUR/GBP has put the market on the radar for this week. Although the Forex pair closed well off its low, it begins this week

EUR/GBP Weekly Chart Pattern Says Brace for Extreme Volatility

Last week’s steep drop by the EUR/GBP has put the market on the radar for this week. Although the Forex pair closed well off its low, it begins this week with enough downside momentum to continue the sell-off.

The EUR/GBP traded down to its lowest level since the week-ending February 5, finishing at .7735, down 0.0135 or -1.72%.

The sharp break was triggered by a new survey by Ipsos Mori which revealed that 55% of respondents were in favor of staying with the European Union while 37% wanted to break away. Market participants are trading on the headlines so we could see more volatility this week and another spike to the downside if any new polls indicate that voters are shifting away from an exit from the European Union to remaining a member.

Weekly EUR/GBP

The main trend is down according to the weekly swing chart. The trend turned down for the first time since the week-ending January 8 when the EUR/GBP took out the swing bottom at .7652. There was very little follow-through on the move, but this could chart this week if sellers return.

Based on the close at .7735, the nearest resistance is a downtrending angle at .7836. This angle, moving down .004 per week from the .8116 top, stopped the market the last three weeks. The momentum will continue to point lower as long as the EUR/GBP remains under this angle.

A break through last week’s low at .7648 could trigger an acceleration to the downside. The main range is .6981 to .8116. If the selling is strong enough to take out .7648 then its 50% level at .7549 becomes the next major downside target. This is followed by a long-term uptrending angle at .7521.

If the selling continues under .7521 then look for a test of the Fibonacci level at .7415.

Given the close at .7735 and its distance from the upside and downside targets, we could see tremendous volatility this week especially since this has become a headline driven market.

 

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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