The EUR/GBP dropped sharply in the yesterday’s trading session and closed below a crucial dynamic support. Price has managed to increase in the last hours and continues to stay above the broken support. Remains to see what will happen in the upcoming days because we still need a confirmation that it will drop further. Price seems very heavy on the short term despite today’s rebound.

I’ve said in the last weeks that we may have a larger drop if the rate will make a valid breakdown below a very important dynamic support. The current drop is somehow natural after the false breakout above a dynamic resistance line.

The Euro increased as the Euro-zone data have come in better than expected, the ZEW Economic Sentiment was reported at 31.8 points, much above the 29.7 estimate and versus the 29.0  in the former reading period, while the German ZEW Economic Sentiment increased from 17.4 to 20.4 points in January, beating the 17.8 estimate. The Euro-zone Consumer Confidence data will be released later and is expected to remain steady at 1 point for the second month in January. The Pound has started to redeem ground in the last hour, maybe because the United Kingdom data have beaten the expectations.

You can see that the price plunged and closed below the sliding line (SL1) of the ascending pitchfork. The drop was natural after the several false breakouts above the fourth warning line (wl4) of the former descending pitchfork. I’ve said that a valid breakdown below the lower median line (LML) will confirm a further drop in the upcoming period, but we still need a confirmation, a valid breakdown below the sliding line (sl1) will really signal a drop at least till the second sliding line (sl2) of the ascending pitchfork. Another support can be found at the 61.8% retracement level. Price continues to move in range on the short term, you can sell the breakdown from this range.