EUR/GBP Monthly Technical Analysis for January 2017

The EUR/GBP sold off early in the month, but strengthened enough later to post a higher close in December. The price action was related to sudden shifts in the fundamentals. The Euro was weaker because of policy decisions by the European Central Bank while the price action in the British Pound was related to position-squaring related to Brexit.

Technical Analysis

The main trend is up according to the monthly swing chart. However, momentum is trending lower with the formation of a new main top at .9144. A trade through this level will signal a resumption of the uptrend.

The major retracement zone is .8369 to .8707. The EUR/GBP is currently trading inside this zone. This zone is controlling the longer-term direction of the market.

The short-term range is .6935 to .9144. Its retracement zone at .8039 to .7779 is the primary downside target. Since the main trend is up, we can expect a technical bounce on the first test of this zone.

Forecast

Based on the close at .8524 and last month’s price action, the direction of the EUR/GBP this month is likely to be determined by trader reaction to the uptrending angle at .8375 and the 50% level at .8369. The combination of these two prices forms a support cluster.

A sustained move over .8375 will indicate the presence of buyers. This could generate the upside momentum needed to challenge the downtrending angle at .8664. This is followed by the Fib level at .8707. Overtaking this angle could trigger an acceleration into the next downtrending angle at .8904.

A sustained move under .8369 will signal the presence of sellers. The monthly chart is wide open under this angle with the next major target coming in at .8039.

Watch the price action and read the order flow at .8375 to .8369 this month. Look for an upside bias to develop over .8375 and a downside bias under .8369.