eurgbp testing expanding wedge range top at 0 882060 risk of a medium term corrective decline 183310

EUR/GBP (Click to enlarge charts) Key elements The recent one month 5.8% rally from the 06 September 2016 medium-term swing low of 0.8332 to today’s […]

EUR/GBP

(Click to enlarge charts)

Key elements

The recent one month 5.8% rally from the 06 September 2016 medium-term swing low of 0.8332 to today’s current intraday high has led the EUR/GBP cross to test the key upper boundary of an “Expanding Wedge” now at 0.8820/8860.
The upper boundary of the “Expanding Wedge” also confluences with a Fibonacci cluster (see daily & 4 hour charts).
Based on the Elliot Wave Principal and fractal analysis, the EUR/GBP has appeared to be undergoing a potential impulsive up movement since the start of the aforementioned “Expanding Wedge” at the 14 July 2016 swing low of 0.8376. Current price structure may have completed waves (1), (2) and coming close to a see a possible completion of wave (3) at the 0.8820/8860 zone. Therefore, the next price action cyclical sequence is likely the corrective wave (4) to see the start of a down move to test the lower boundary of the “Expanding Wedge” at 0.8450/8417 which also confluences with a Fibonacci cluster. Risk of a mean reversion in price action at this juncture.
Momentum studies are also supporting the aforementioned potential mean reversion price action behaviour. The daily RSI oscillator is now coming close to its extreme overbought level and the shorter-term (4 hour) Stochastic oscillator has just exited from the overbought region. These observations suggest that the current upside momentum of price action is being “overstretched”.

Medium-term Key Levels (1 to 3 weeks)

Pivot (key resistance): 0.8820/8860

Supports: 0.8600 & 0.8450/8417

Next resistance: 0.9040/9130

Conclusion

The EUR/GBP may face the risk of a mean reversion at the 0.8820/8860 medium-term pivotal resistance for a potential corrective decline towards 0.8600 before 0.8450/8417.

On the other hand, a clearance above 0.8860 (daily close) is likely to see the continuation of the bullish up move to target the next resistance zone of 0.9040/9130.

Charts are from eSignal

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