- EURGBP turns lower from confluence of resistance within broader pattern
- Sufficient risk/reward ratio
- GBPUSD trade in progress
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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