By: Doug Rosen
EUR/GBP pair finally made its break to the downside yesterday. As I said in my analysis yesterday, I love it when price is against a trend line because only one of two things can happen, either price will bounce or it will break. This time around, it finally broke.
Looking at price action right now on the daily timeframe, I can say that this pair cannot go anywhere but down and maybe down to .8350 Realistically, price has to retrace just a bit, but it doesn't have to but generally a heavy move such as the one we experienced is usually followed by some brief consolidation period.
Price is still within the Bollinger band so a retracement does not have to happen just yet, however, price is a ways from the 5 ema and the 5 ema is what drives price on its trend so the 5 ema needs to catch up sooner or later and usually some brief consolidation and a little retracement forces the 5 ema to catch up with price action by pulling the 5 ema down or price simply meeting the 5 ema half way.
Even though price is looking very bearish there will always be some profit taking after extreme moves and there are always a few counter traders out there placing buy orders and this is what causes the retracements.
On the 4 hour timeframes price is clearly falling fast and heavy and is walking the lower Bollinger band tot eh downside. We call this 'Walking the Band'. On the 1 hour timeframe price has been riding the 5 ema gracefully downward and the same goes on the 15 minute timeframe.
Price has broken last month's low and is approaching the monthly S1 pivot point at .8487 where I would expect a slight bounce. Price has fallen below the weekly S2 at 0.8509 and the hourly 13 ema is crossing below it.
At the time I am writing my analysis price is sitting on yesterdays low at .8500 which happens to be a psychological level and the 15 minute ema's are laying heavy on price and will probably push it through yesterdays low. As I said earlier, price usually consolidates after a big move and price will probably consolidate on the low until the 5 ema on the higher timeframes catches up with price and forces it further down.