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EUR/GBP Technical Analysis: Forming Major Topping Pattern?

EUR/GBP Technical Analysis: Forming Major Topping Pattern?

Ilya Spivak,

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Talking Points:

  • EUR/GBP Technical Strategy: Flat
  • Euro forms Shooting Star candle, hinting at reversal near 0.86 vs. Pound
  • Reversal may precede formation of longer-term Head and Shoulders top

The Euro put in a Shooting Star candlestick on a test of resistance near the 0.86 figure against the British Pound, hinting a turn lower may be ahead. A reversal here may precede the formation of right shoulder in bearish Head and Shoulders topping chart pattern carved out since late June.

From here, a daily close below the intersection of the 14.6% Fibonacci expansion and a rising trend line at 0.8503 opens the door for a test of the 0.8282-0.8334 area (38.2% Fib retracement, September 6 low). Alternatively, a break above the 23.6% expansion at 0.8607 exposes the 0.8725-77 zone (August 16 high, 38.2% expansion).

Profits were booked on the second half of a short EUR/GBP position triggered at 0.8631 after prices reclaimed a foothold above the 0.85 figure. Re-entering the position in line with seemingly still-valid fundamental considerations will require confirmation on a break of the uptrend from September lows.

What do past EUR/GBP patterns hint about on-coming trends? Find out here !

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