The 100 SMA Turns EUR/GBP Bearish Again
EUR/GBP turned really bullish in Q2 after Theresa May failed to pass her Brexit deal in the British parliament. But, the trend turned bearish by the middle of July and since then the pressure has been to the downside. The economy of the Eurozone has deteriorated and the European Central bank has turned dovish, while the UK is heading towards general elections, which should be a positive thing for the GBP, as I pointed out in one of our weekend articles.
We saw this pair retrace higher during late September/early October and the price moved above 0.90 for a brief period of time, but sellers returned and the bearish trend resumed again. The trend was pretty strong in the first two weeks after the downtrend resumed.
When the trend is strong, the smaller period moving averages come into play and in this case, the 20 SMA (grey) was providing resistance and pushing the price lower. But, in the last two weeks, the decline stopped and EUR/GBP was trading in a range around the 50 SMA (yellow) on the H4 chart.
But, the 100 SMA (green) caught up with the price and it started providing resistance immediately. The buyers haven’t been able to push the price above this moving average and we know that if something doesn’t go up, it will eventually go down. That’s what’s happening with this pair now as it reverses down. Stochastic became overbought yesterday and today it has turned down as well, so sellers are back in control now.
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