EURGBP Short at Confluence of Resistance
- EURGBP turns lower from confluence of resistance within broader pattern
- Sufficient risk/reward ratio
- GBPUSD trade in progress
Find out what’s driving the Euro and Sterling in our market forecasts.
Today, we are seeing EURGBP turn lower from the confluence of resistance we discussed in yesterday’s webinar. The confluence consists of the trend-line off the October high, underside retest of the broken November 2015 trend-line, and the 200-day MA.
The turn down from confluence and distance until significant support makes this a compelling opportunity. Looking lower from here support arrives in the 8300/50 vicinity; which would further develop out a big-picture descending wedge. The descending wedge break at some point is a whole other trade in of itself, but for now we are focused on the short-term opportunity within the pattern.
With the current price at 8542 and a stop about 20 pips above yesterday’s high at 8635, the stop-out is under 100 pips. With support a couple of big figures lower this leaves ample room for profit, thus giving a good risk/reward profile of around 1:2. There could be some support on the shorter-term lower parallel in the low-8400s, but only viewed as a potential speed-bump at this time.
Another sterling-related trade in progress put out on the site last month – long GBPUSD – is a correlated trade, obviously; even though the correlation has broken down in the short-term. A good chance if both work out the correlation will return. With that in mind, any time holding a trade which has or could have a high degree of correlation you want to be mindful of the combined risk.
Entry: Market price (currently 8542)
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---Written by Paul Robinson, Market Analyst
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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.