EUR/GBP Technical Strategy: Flat
- Euro vulnerable to deeper losses after breaking channel support
- Dominant down trend established form October 2017 still intact
- Improved risk/reward parameters sought to enter short position
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The Euro looks vulnerable to deeper losses against the British Pound after prices broke support guiding the upswing from lows set in mid-April. The overall trend continues to be defined by a falling channel containing price action since October 2017.
From here, a daily close below the 38.2% Fibonacci expansion at 0.8686 opens the door for a challenge of the 0.8620-37 area (April 17 low, 50% level). Alternatively, a move back above the 23.6% Fib at 0.8746 paves the way for a retest of the channel floor, now at 0.8770, followed by the May 4 high at 0.8843.
While entering short seems like a broadly compelling proposition, prices are a bit too close to immediate support to justify entering the trade immediately on risk/reward grounds. With that in mind, opting to stand aside and monitoring positioning for a more actionable setup appears sensible.
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--- Written by Ilya Spivak, Currency Strategist for DailyFX.com
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