EUR/GBP Technical Analysis: Euro Sinks to 4-Month Low

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Talking Points:

• EUR/GBP Technical Strategy: Short at 0.7876
• Euro sinks to the weakest level in nearly 4 months vs. British Pound
• Bounce hinted before selloff resumes, short position remains in play

The Euro resumed its decline against the British Pound after a brief corrective recovery, plunging to the lowest level in nearly four months. Prices appear to have completed a large Head and Shoulders top, hinting at the resumption of the multi-year down trend established in late 2008.

A daily close below the 50% Fibonacci retracement at 0.7549 paves the way for a test of the 61.8% level at 0.7415. Alternatively, a reversal above the 38.2% Fib at 0.7683 opens the door for another challenge of support-turned-resistance at 0.7748.

A short EUR/GBP trade was triggered at 0.7876 and partial profits were subsequently booked as prices hit the first downside objective. Remaining exposure continues to be in play, aiming to capture follow-on weakness. The stop-loss has been adjusted to the breakeven level. Positive RSI divergence hints a bounce may be due before the selling resumes.

Losing money trading EUR/GBP? This might be why.