EUR/GBP: Forming a probable H&S - SocGen

Research Team at Societe Generale, suggests that the EUR/GBP embarked on a steady uptrend after testing key support at 0.70/0.68 and achieved upper bound of a multiyear descending channel at 0.81/0.8150.

Key Quotes

“The up move appears to have exhausted after formation of a shooting star. Monthly RSI is approaching towards a resistance suggesting 0.81/0.8150 as an important hurdle. Only a definite close beyond this will indicate a larger up move towards 0.8370 with next significant resistance at August 2013 highs of 0.87.

Recently the pair has achieved the projected potential for a double bottom. Of note is the fact that it has completed a typical period of 7 months to a year which also finalized recoveries since 2008. Thus, a pause is looming.

An intermittent top appears to be in place as highlighted by weekly stochastic indicator which is now pulling back after testing a pivotal ceiling. A move towards 0.7650 and more importantly towards confirmation level of the double bottom at 0.75/0.7450 looks on cards. This is likely to be a pivotal medium term support. Short term, the pair is evolving within a probable H&S; 0.7935/80 will be an immediate resistance.”