A few weekends ago I mentioned that I like to have at least one long-term play on my watch list. And the price action on the EURGBP since July of last year certainly fits the bill.
As you can see from the weekly chart below, the Euro cross has carved out what appears to be a head and shoulders pattern. The formation is even more evident when you drill down to the daily time frame.
But I wanted to keep this commentary directed toward the weekly chart to include a significant trend line. The level in question extends from the November 2015 low and intersects with the 0.8330 neckline creating a confluence of support.
While the 0.8330 area will likely attract buyers if tested, I won’t be one of them. The price structure that has developed over the last eight months prohibits me from considering buying opportunities.
Instead, I’ll wait for a close below the 0.8330 neckline, which could trigger an 850 pip move toward the 0.7500 area. There will, of course, be additional support levels within this range, but the measured objective suggests that 0.7500 isn’t out of the question as a long-term target.
In the near-term, it seems it’s going to take a daily close below the 0.8460/70 region to open the door to 0.8330. Only a daily close above 0.8640 would cause me to second guess the potential for a major reversal.
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