EUR/GBP Cross Breaks Below Confluence of Support

04/22/2010 12:01 am EST

Focus: FOREX

James Chen

Chief Technical Strategist, FX Solutions

Price action on EUR/GBP, a daily chart of which is shown, has tentatively broken down below a confluence of two different uptrend support lines—one extending from the June 2009 low, and the other extending from the July 2007 low.


Click to Enlarge
(Price on 1st pane, Slow Stochastics on 2nd pane; horizontal support/resistance levels in yellow; uptrend lines in green; downtrend lines in red; chart patterns in white; 50-period simple moving average in light blue.)

This tentative confluence breakdown occurs within the context of a month-long downtrend extending from the mid-March high, and establishes a new two-month low for the pair.

Now that a downtrend continuation has tentatively been established, a key immediate support target to the downside resides in the 0.8600 price region.

Further bearishness that breaks down below 0.8600 could go on to target further downside support in the 0.8400 price region.

By James Chen, chief technical strategist, FXSolutions.com

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