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EUR/GBP Technical Analysis: A Top in Place Above 0.87 Figure?

EUR/GBP Technical Analysis: A Top in Place Above 0.87 Figure?

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Talking Points:

  • EUR/GBP Technical Strategy: Short at 0.8631
  • Euro overturns upside breakout, hints at top above 0.87 vs. Pound
  • Short position triggered, initially aiming for a decline below 0.85

The Euro failed to find follow-through after piercing July’s swing high earlier in the week, with prices overturning the breakout following the formation of a bearish Dark Cloud Cover candlestick pattern. The setup hints a near-term top may be in the place, opening the door for downside follow-through.

Near-term support is at 0.8459, the 23.6% Fibonacci retracement. A break below that on a daily closing basis opens the door for a test of trend line support at 0.8380, followed by the 38.2% level at 0.8295. Alternatively, a reversal back above the July 6 high at 0.8627 paves the way for a challenge of the August 16 top at 0.8725.

The recent EUR/GBP trend has unmistakably favored the upside. However, fundamental considerations warn this may not prove lasting and current technical positioning offers acceptable risk/reward parameters to bet on that suspicion.

A short trade has been triggered, initially targeting 0.8459. A stop-loss will be activated on a daily close above 0.8725. Half one position will be covered and the stop-loss moved to breakeven when the first objective is reached.

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