The EUR/GBP pair has pulled itself out of the bears grip, but whether we have the start of a Bullish Trend or just a retracement developing is too soon to tell. The pair has been more or less in a downtrend since hitting an all time high in 2008 at 0.9802 before falling to a 5 year low on July 22 of this year. Price found a floor at the Weekly S1, 0.7765 and has rebounded to the Monthly Pivot at 0.7892 during yesterday's market action. While it now faces strong resistance at this level, there is a nice cross & separation of the 5 & 13 EMA's, possibly indicating a real momentum shift to Bullish price action. If price closes above 0.7900 we could see a rally to the 2012 38.2% level at 0.8041, which also happens to be very close to the Monthly R1 at 0.8028. This would make sense as well since this same area held the pair captive for May & June of this year. Since price often returns to a level it has struggled to break out of before continuing the trend, this is a good profit taking area as well as a level at which we can expect the Bears to rally from again. Price has been strongly Bullish the last 2 trading days and I expect it to continue, but with NFP and other news events looming as the week wears on I am bullish but cautiously so. If price does resume its Bearish trend, look for support at 0.7868, 0.7844 & 0.7815 Intraday, and 0.7765 will be the next key weekly support level.
Happy Trading!