EUR/GBP Technical Analysis: Short Trade Setup Established
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- EUR/GBP Technical Strategy: Pending short at 0.7917
- Euro breaks key support line, hinting at down trend resumption vs. Pound
- Corrective rebound above 0.79 figure sought for entry into short position
The Euro declined against the British Pound as expected after prices produced a Bearish Engulfing candlestick pattern below the 0.82 figure. Prices have now broken trend line support set from early February, hinting the dominant long-term down trend may be resuming.
From here, a break below the 23.6% Fibonacci retracement at 0.7849 on a daily closing basis opens the door for a challenge of the 0.7683-0.7703 area (horizontal pivot, 38.2% level). Alternatively, a reversal above the intersection of trend line support-turned-resistance and the 14.6% Fib at 0.7951 clears the way for a retest of the April 7 high at 0.8117.
Entering short in line with our2016 fundamental forecast is a tempting proposition, but prices are to close to support to justify taking a trade at current levels. Rather, we will establish an entry order to sell EUR/GBP at 0.7917. If triggered, the trade will initially target 0.7849 with a stop-loss activated on a daily close above 0.7951.
Where is the Euro going in the second quarter? See our forecast here!
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