EUR/GBP Technical Analysis: Short Trade Setup Established
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- EUR/GBP Technical Strategy: Flat
- Bearish Candlestick Pattern Hints Euro Down Trend vs. Pound May Be Resuming
- Short Entry Order Set Below 0.74 to Achieve Acceptable Risk/Reward Parameters
The Euro put in a bearish Dark Cloud Cover candlestick pattern, hinting that it may be readying to resume their long-term down trend against the British Pound. The pattern has appeared on a test of critical resistance at a falling trend line that has capped gains since August 2013.
A reversal downward from here sees initial support at 0.7313, the 23.6% Fibonacci retracement, with a break below that on a daily closing basis opening the door for a test of the 38.2% level at 0.7250. Alternatively, a push through the trend line that also takes out the December 22 high at 0.7416 sees the next upside barrier in the 0.7473-82 area (May 7 high, 38.2% Fib expansion).
Risk/reward considerations embedded in our strategy argue against entering short at current levels. With that in mind, we will establish an entry order to sell the pair at 0.7382. If triggered, the position will initially target 0.7313 and carry a stop-loss to be activated on a daily close above 0.7416.
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