Since today is the last day of the trading week and the main event is the data on the US labor market, which is described in detail in the article on the euro/dollar, we will return to the consideration of the GBP/USD currency pair on Monday. Today, we will take a closer look at the most interesting EUR/GBP currency pair, which often has a significant impact on the euro and the pound paired with the US dollar. Since March trading ended only the day before yesterday, I suggest starting with the analysis of the most senior timeframe.
Monthly
As can be seen in this period, the bears on the instrument more than confidently control the course of trading and move the quote in the south direction. And it all started after the formation of the circled December candle of 2020, which has a huge upper shadow. After such shadows, one can only dream of an upward trend, because for this it was necessary to absorb the December candle along with its long upper shadow. Quite a logical and natural continuation of trading in the euro/pound was not just a decline, but an actual drop in quotes. The pair very confidently entered the limits of the monthly cloud of the Ichimoku indicator, after which it tried to develop a downward trend.
However, in February, this was prevented by the 89 exponential moving average, which is colored black on the chart. However, subsequent events showed that the bulls for the pound did not think to let go of the reins of trading, and March ended with the appearance of an impressive and full bearish candle with a closing price below 89 exponents. Nevertheless, on the monthly timeframe, its breakdown is considered true. In my opinion, it is still too early, since one candle closed at 89 EMA does not give full confidence in this. Moreover, at this stage of time, the pair is trading approximately in the middle of the Ichimoku indicator cloud, which is a zone of uncertainty. And yet, if we conclude a monthly schedule, then there are much more technical prerequisites for the continuation of the downward trend in the medium term.
Daily
But on the daily chart yesterday, a reversal signal appeared, which is a model of the Doji Star candle analysis. At the same time, it is very significant that this candle appeared as a result of unsuccessful attempts by bears to push through the most important psychological and technical level of 0.8500. It is characteristic that this is the third attempt of the players to lower the trades below 0.8500, however, the candles for March 29 and 31, as well as yesterday's candle, have always closed above this landmark level. Taking into account that the euro/pound pair was under strong selling pressure before, and it found support near the mark of 0.8500, we can assume that it is probably time for a correction of EUR/GBP. This assumption will be confirmed if yesterday's highs are updated at 0.8532 and the daily candle closes above this level. If this happens, the next target of the pair correction will be the red line of the Ichimoku Tenkan indicator, which runs at 0.8568. I consider the price area of 0.8600-0.8610 to be a higher target of the corrective rollback of the pair, where another important psychological level passes, as well as the blue Kijun line.
Trading recommendations for EUR/GBP:
Given the fact that the euro/pound cross rate has already fallen significantly, it is time to adjust, as indicated by the candle signal on the daily chart. Aggressively and riskily, I can recommend trying to buy from current prices with a mandatory stop below yesterday's lows of 0.8491 and the nearest targets at 0.8568 and 0.8600. Here, you should expect the appearance of bearish reversal patterns on the daily, four-hour, and (or) hourly charts, and then open short positions on the euro/pound pair. It is quite natural that these goals and trading recommendations are unlikely to be relevant today, thus, I recommend watching this tool next week.
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