EUR/GBP Weekly Outlook

EUR/GBP edged higher to 0.9132 last week but failed below 0.9137 retreat and retreated sharply. The development suggests that consolidation from 0.9137 is still in progress and fall from 0.9132 should extend further to retest 0.8980. Nevertheless, we'd expect downside to be contained by 38.2% retracement of 0.8662 to 0.9137 at 0.8956 to conclude the consolidation and bring rally resumption. Above 0.9137 will target trend line resistance at 0.9205 next. However, sustained break of 0.8956 fibonacci level will argue that rise from 0.8601 is finished and will target a retest of this support instead.

In the bigger picture, the main question remains on whether the correction from 0.9799 is finished at 0.8399, or it is still unfolding as a larger consolidation pattern. Also, if the consolidation is still in progress, what pattern would it be. In any case, we'd expect long term up trend to resume for another high above 0.9799 eventually after completing the current medium term consolidation. Break of 0.9410 resistance will be an early signal that the long term up trend is resuming and will turn focus to 0.9799 high.

In the long term picture, current development suggests correction from 0.9799 is still in progress and the long term up trend from 2000 low of 0.5680 is not ready to resume yet. Nevertheless, correction from 0.9799 is expected to be contained by 0.7963/0.8186 support zone and bring up trend resumption. Rise from 0.5680 is still expected to continue to 261.8% projection of 0.5680 to 0.7258 from 0.6535 at 1.0666 eventually.

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