EURGBP is breaking down from a ten-month range that could offer a setup next week.
But before we get to that, I want to share a recent trade setup I discussed with members of the Daily Price Action trading group.
It ties in perfectly with today’s EURUSD post, where I discussed the high win rate from trading fakeouts.
Here’s what happened recently on the 4-hour time frame:
The pattern above is a descending triangle, which usually breaks lower.
However, notice where EURGBP closed several 4-hour candles above resistance, only to close right back below the level.
That close back below confirmed the fakeout.
See my earlier post on EURUSD for another example of a fakeout.
We even got a retest of the failed level as new resistance, which offered a perfect short entry.
Again, I pointed this out to members as it was happening, so this isn’t a hindsight look at what we could have traded.
The best way to succeed at trading is to master one strategy, and fakeouts like the one above are one of the simplest and most profitable in Forex.
Okay, now for next week’s trade idea.
This is a simple range breakdown from EURGBP that could offer a short setup next week.
First, let’s look at the two ranges going back to 2017.
Notice we have a range within a range.
Considering EURGBP tested the 0.9290 range resistance in September, there’s a good chance we see the pair revisit the 0.8300 range lows this year.
Given the choppy nature of the currency cross, it may take a while, but the odds of a 0.8300 retest are high.
The 0.8570 level breaking down today could offer an entry next week.
Of course, we need a retest of 0.8570 as new resistance, which is never guaranteed.
However, a retest would offer the best risk-to-reward ratio, especially with the significant amount of event risk next week.
As for support, there is little until the 2017 range lows at 0.8300.
A daily close back above 0.8570 next week would signal a fakeout and buy signal for a move back to 0.8670.
But I’ll respect today’s breakdown while EURGBP trades below 0.8570 on a daily closing basis.
