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Talking Points:
- EUR/GBP Technical Strategy: Flat
- Euro chart positioning hints at topping near 14-month high vs. British Pound
- Waiting for reversal confirmation to enter short in line with long-term trend
The Euro may be carving out a top after prices put in a bearish Harami candlestick pattern after touching a 14-month high against the British Pound. The emergence of negative RSI divergence points to ebbing upside momentum and reinforces the case for a downside scenario.
Near-term resistance-turned-support is at 0.7821, with a break below that on a daily closing basis opening the door for a test of another horizontal price pivot at 0.7703. Alternatively, a push above the 23.6% Fibonacci expansion at 0.7912 paves the way for a challenge of the 38.2% level at 0.8046.
We are keen to find an opportunity to enter short EUR/GBP in line with our 2016 fundamental outlook. A Harami pattern amounts to a relatively flimsy signal however and requires further confirmation to be actionable. With that in mind, we will opt for patience and observe from the sidelines for the time being.
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