EUR/GBP dropped sharply to as low as 0.8312 last week but formed a temporary low ahead of 0.8303 low and recovered. Nonetheless, the development still suggests that larger correction from 0.9304 is resuming and further fall is expected through 0.8303 low ahead.
Initial bias in EUR/GBP is neutral this week for consolidation above 0.8312 temporary low first. Upside of recovery should be limited by 0.8511 resistance and bring another decline. Below 0.8303 will extend the fall from 0.9304 to 0.8116/20 cluster support. As decline from 0.9304 is seen as a corrective move, we’d expect strong support around 0.8116/20 to contain downside and completion such correction. Meanwhile, on the upside, break of 0.8511 will turn bias back to the upside for 0.8786 resistance instead.
In the bigger picture, price actions from 0.9304 are viewed as a medium term corrective pattern. Such decline is likely ready to resume and should make a new low below 0.8303. At this point, we’d expect strong support from 0.8116 cluster support (50% retracement of 0.6935 to 0.9304 at 0.8120) to contain downside. Rise from 0.6935 (2015 low) will resume at a later stage to 0.9799 (2008 high). However, sustained break of 0.8116 could bring deeper decline to next key support level at 0.7564 before the correction completes.
In the long term picture, firstly, price action from 0.9799 (2008 high) is seen as a long term corrective pattern and should have completed at 0.6935 (2015 low). Secondly, rise from 0.6935 is likely resuming up trend from 0.5680 (2000 low). Thirdly, this is supported by the impulsive structure of the rise from 0.6935 to 0.9304. Hence, after the correction from 0.9304 completes, we’d expect another medium term up trend to target 0.9799 high and above.