Euro May Be Forming Top vs. British Pound
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The Euro may be forming a top against the British Pound, with prices carving out a bearish Head and Shoulders chart formation below the 0.80 figure. The setup follows a corrective advance that itself was the culmination of a longer-term H&S bottom carved out between March 2015 and January 2016. A break of rising trend line support guiding the near-term upswing from November 2015 and a subsequent hold of this barrier on a retest as resistance suggest the next leg of the mult-year EUR/GBP down move established from late 2008 may be in progress already. To be fully confirmed, the H&S top requires a daily close below neckline support at 0.7705, the 23.6% Fibonacci retracement.
I will begin to build short exposure with a small position within and current trading range and look to grow the trade once the H&S pattern is confirmed. To meet acceptable risk/reward parameters, an entry order has been set to enter short at 0.7854. If triggered, the trade will initially target 0.7705. A stop-loss has been set to activate on a daily close above 0.7928, the February 25 high. I will take profit on half of the position once prices touch the first objective and wait for a daily close below it to consider increasing size.
How does this trade fit in with my 2016 forecast? Find out here!
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