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Chris Svorcik
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EUR/USD

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:

  1. The strong bullish impulse was the next bullish reversal signal (wave 1 pink).
  2. The bearish price action after the impulse was also corrective. A bearish ABC (grey) pattern seems to be unfolding.
  3. The bullish bounce at the 61.8% Fibonacci (green box) and the inverted head and shoulders pattern (green boxes) support the reversal too.
  4. Also, the ABC did not break the bottom of wave 1, which means it could be a wave 2 (pink).
  5. However, a break below the bottom invalidates (red button) the wave 123 (pink) pattern.
  6. A break above the long-term moving averages confirms the uptrend (green arrows).
  7. 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):

  1. A break below the bottom invalidates (red button) the bullish reversal and could indicate a deeper pullback on the 4 hour chart.
  2. 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.
  3. 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).
  4. A bullish bounce (green arrows) could confirm the reversal up.
  5. The bullish price action seems to be completing a 5 wave (grey) leading diagonal in a wave 1 (grey) pattern.

Good trading,

Chris Svorcik

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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