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EUR/GBP Technical Analysis: Euro Soars to Test Double Top

EUR/GBP Technical Analysis: Euro Soars to Test Double Top

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Talking Points:

  • EUR/GBP Technical Strategy: Flat
  • Euro Turns Sharply Higher vs. British Pound Amid China-Inspired Risk Aversion
  • Waiting for New Trading Opportunity as Prices Test Key Double Top Below 0.75

The Euro launched sharply higher against the British Pound, taking out falling trend line resistance capping gainssince August 2013. Prices soared amid unwinding of EUR-funded carry trades after China devalued the Yuan by the most in five months yesterday, triggering risk aversion.

Near-term resistance is now at 0.7482, the a double top in play since early May, with a break above that on a daily closing basis opening the door for a challenge of the 50% Fibonacci expansion at 0.7530. Alternatively, a reversal below resistance-turned-support at 0.7415, the 23.6% Fib, paves the way for a test of the 0.7365-76 area (trend line, 14.6% expansion).

We entered short EUR/GBP at 0.7382 and subsequently booked profits on half of the position after the trade hits its initial objective. The remainder of the trade has been stopped out at breakeven. We will move to the sidelines from here, waiting for another actionable opportunity to present itself.

Losing Money Trading Forex? This Might Be Why.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.