The EUR/GBP has been trading in a weekly channel since establishing a high of 0.9802 in 2008, and has now once again reached the top of this channel. This time around it also matches the 50% FIBO level from the high in 2008 to the low of July 2012. The actual 50% level is 0.8778, and this is a critical level for the pair. A close above this level could indicate an extended move higher and a break of the channel towards the 61.8/0.9020 area. Price last reached the 0.9020 area in May 2011 when it topped out at 0.9083 and then reversed and fell over 1300 pips in the weeks following. If price follows its established path, we could see this pair reverse very soon, with the likely target being the bottom of the channel over the weeks ahead at around 0.7600, but that is far off right now. In the shorter view, we are looking at one final push from the current week's high up to 0.8778 and then a possible reversal, supported by a massively overbought Stochastic reading, possibly to the 38.2/0.8563 area with support in between at the broken Weekly R1 of 0.8706, last week's high 0.8681 and then the important Weekly Pivot at 0.8580. An extension above current prices of 0.8718 will bring resistance at the previously mentioned upper channel/50% level of 0.8778 and Weekly R2 at 0.8805. A clear break of this are brings the Weekly R3 of 0.8930 into view.
Happy Trading!