The Pound has begun to consolidate at 1.44. Notice the last several down candles have all had long lower wicks. The implication is that Sellers are forcing price down but there are enough buyers in the market to keep pricing from dropping further. On the flip side, the buyers are not yet strong enough to push prices up higher either. Technicians will be looking for a close above Resistance or a close below Support as indication that the GBP is ready to breakout in one direction or another.
In contrast to the GBP above we are not seeing too many long lower wick candles. Rather , we are seeing closes that appear near the lows of the day right up through price action yesterday. A close below Support, as shown on the chart, implies prices have further to fall as buyers are not ready to jump in and support the EUR. A close above the prior high may suggest the EUR sell off is bottoming. If you look back there has only been one step close above the prior high in the last 6 months, but that occurred over a weekend, purely on a fundamental level.
The GBP appears to be showing signs of life at least versus the Greenback while the EUR is a close away from potentially another significant drop. It is always a good idea to confirm your analysis. In this case we will use the EUR to GBP cross. What we should see is the EUR on the fringe of dropping further and a well defined level of Resistance. A break below Support and the GBP should be off and running while a break above Resistance and the 50 day Moving Average may signal a EUR bottom. This supports our analysis. If the GBP is firming versus the Greenback it should be ready to soar versus the downtrodden EUR. Yet, if the EUR can break Resistance against the GBP it most likely would have taken out the prior high as depicted on the EURUSD chart above.
Written by bforex.com