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Bullish EUR/GBP Off of Range Support
Both the Euro and British Pound have been rather strong this year against US and Japanese counter-parts. This leaves bullish trends in many of the more popular pairings available to traders, and for those looking for ways of taking a short-side stance against the British Pound, it would appear that few attractive options are available.
One area of interest for such a drive could be the recent range in EUR/GBP. After prices in the pair spent the bulk of last summer trending-higher, a pullback has developed with support continuing to show around the 50% retracement of that move. That support level aligns with another Fibonacci level, taken from the longer-term bullish trend that started in 2015 and set a fresh eight-year high just last year. The 23.6% retracement of that move comes-in at .8800, and given its close proximity to the 50% retracement of the shorter-term move at .8810, this would offer traders a confluent area of support to work with.
Stops can be set below .8775 to give some room for that support zone, and this would enable a better than 1-to-1 risk-reward ratio with initial profit targets on a re-test of .8900, at which point stops can be adjusted up to break-even. For those that’d like to look for a break of the range, secondary profit targets could be set to .8925, just inside of the 38.2% Fibonacci retracement that helped to set resistance last week, followed by the psychological level of .9000, which gave multiple iterations of resistance throughout Q4 of last year.
EUR/GBP Four-Hour: Price Action Testing Range Support
Chart prepared by James Stanley
To read more:
Are you looking for longer-term analysis on Euro, GBP or the U.S. Dollar? Our DailyFX Forecasts for Q1 have a section for each major currency, and we also offer a plethora of resources on our EUR/USD, GBP/USD and U.S. Dollar pages. Traders can also stay up with near-term positioning via our IG Client Sentiment Indicator.
--- Written by James Stanley, Strategist for DailyFX.com
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