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EUR/GBP Exposes the 2012-Low as Votes Come in

As the votes come in, reports are telling us that there is a good chance the result will be a "NO" for Scottish independence from the UK. We are seeing the GBP gain across the board, which tells us that recent decline in the sterling was due to uncertainty surrounding the prospect of Scottish independence. We can say that this prospect is fading, and the GBP is strong again. 

The EUR/GBP reflects this GBP strength as it breaks below a choppy consolidation that has been forming for over a month. The daily chart shows that the current condition is all bearish, based on the moving averages, price action, price-SMA relationship, and the RSI reading which held below 60, showing maintenance of the bearish momentum.

(EUR/GBP Daily Chart 9/19)

At this point, if we get a pullback, a bearish market should keep EUR/GBP below 0.7950. If the vote turns out to be "YES", we should expect price to break above 0.7950. It would be ideal to see price establish another low above 0.79 to consider a bullish correction, but if the market is reacting to a "YES" vote, we might not get this pullback, and should expect more of a v-shape reversal in the short-term, with upside to 0.8150, and 0.82.

On the weekly chart, we can see that there is some room to the downside before hitting the 2012-low at 0.7764. Below that, the next level that provided support before was 0.7693, back in 2008.

So, EUR/GBP is definitely bearish, unless we get a surprise "YES" result. But, as price approaches the 0.7695-0.7765 area as well as the falling channel support, we should anticipate some significant consolidation like the one we had in July-August for example, especially if the weekly RSI tags 30, which would suggest oversold condition.

(EUR/GBP Weekly Chart 9/19)