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Strong Support For EUR/GBP

Euro against the pound is almost flat year-to-date; down around 1.5%. The majority of 2019 thus far has been dominated by a rally that saw a 10% appreciation in the Euro against the Pound. The market has retraced over 5% since then. A YTD daily chart is shown in figure 1.

Figure 1

The retracement which began in mid-August has been pretty much uninterrupted. Only a minor flat consolidation period paused the downward move. But the retracement has run into a very interesting area. It would be no surprise for this market to bounce strongly from support in the coming days. Firstly, look at how the market interacts with the pitchfork drawn in figure 2.

Figure 2

The price has responded on many occasions to the pitchfork barriers, particularly to the median line. At the time of writing, the market has just fallen to the lower trendline and thus far failed to close below. This is not the only source of support at this level. Support also comes from a 0.618 retracement level derived from the previous uptrend, shown in figure 3.

Figure 3

The 0.618 level in figure 3 also coincides with a 2.618 extension of the interruption of the correction, shown by the blue set of dashed Fibonacci levels in figure 4.

Figure 4

There is a triad of significant price barriers all concurring in the red circle in figure 4 which points to a potential level of significant support. If price does reverse in this area, a resumption of the uptrend may well take price back to previous highs above £0.93 or beyond. This is highly probable.

If the market does not reverse here, it will probably go much lower. A downtrend strong enough to breakthrough the strong confluence of support which is present now will almost certainly run much lower before reversing. This could be down to previous resistance at the 3.618 in figure 4 around 86.6p. If the market falls below that level, it will probably look for support around the 4.236 extension level around 85.9p or previous lows around 85p.

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