EUR/GBP Bullish Reversal Continues After ABC Bounce at 61.8% FibEUR/GBP made a bullish bounce at the 61.8% Fibonacci retracement level. Is this a confirmation signal of an upcoming bullish reversal?
The EUR/GBP made a bullish bounce at the 61.8% Fibonacci retracement level. Is this a confirmation signal of an upcoming bullish reversal?
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So far the EUR/GBP is developing a reversal pattern as we analysed in our previous article. This article will review what to expect next.
Price Charts and Technical Analysis
The EUR/GBP downtrend created a divergence pattern between the bottoms (purple lines). This is usual for a wave 3-4-5 (grey) pattern:
- The strong bullish impulse was the next bullish reversal signal (wave 1 pink).
- The bearish price action after the impulse was also corrective. A bearish ABC (grey) pattern seems to be unfolding.
- The bullish bounce at the 61.8% Fibonacci (green box) and the inverted head and shoulders pattern (green boxes) support the reversal too.
- Also, the ABC did not break the bottom of wave 1, which means it could be a wave 2 (pink).
- However, a break below the bottom invalidates (red button) the wave 123 (pink) pattern.
- A break above the long-term moving averages confirms the uptrend (green arrows).
- A bullish bounce at the deeper Fibonacci levels also indicates a potential uptrend (blue arrows).
On the 1 hour chart, we can see a bearish 5 wave pattern (orange) probably completed wave C (grey) of wave 2 (pink):
- A break below the bottom invalidates (red button) the bullish reversal and could indicate a deeper pullback on the 4 hour chart.
- A break above the 50% Fibonacci level makes an uptrend more likely (blue arrow). In that case, price action is breaking the 50% Fibonacci resistance.
- A break below the support trend line (green) could just be a simple pullback if price action respects the Fibonacci level and potential inverted head and shoulders pattern (green boxes).
- A bullish bounce (green arrows) could confirm the reversal up.
- The bullish price action seems to be completing a 5 wave (grey) leading diagonal in a wave 1 (grey) pattern.
The analysis has been done with the indicators and template from the SWAT method (simple wave analysis and trading). For more daily technical and wave analysis and updates, sign-up to our newsletter
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