The broader picture for EURGBP no doubt remains bullish as the pair has now been in rally mode since coming off the July 2015 bottom at 0.6935.
However, post-Brexit price action suggests that a correction may be in order before the next leg up can materialize. The notion isn’t surprising given the fact that we haven’t seen a meaningful pullback from the cross since late May.
But before we get to that, let’s take a step back and take note of where the pair sits at the moment in relation to the massive eight-year bull flag pattern.
Note that the formation you see above was confirmed in late June and points to much higher prices for the Euro cross should former resistance hold as new support.
But no rally is complete (or healthy) without pullbacks along the way, which brings me to the current trade idea.
On September 1st the EURGBP closed below trend line support that extends from the June 27th low at 0.8176. After falling 120 pips following the break the pair found a bid at the 0.8332 handle and has since retested the confluence of resistance at 0.8480. The last 48 hours of trade suggests that sellers remain firm in this area.
So where is the pair headed from here?
While there’s no such thing as a sure thing, recent price action looks set to retest last week’s low at 0.8332. And if we get a daily close below this level there isn’t much standing in the way of the pair closing the post-Brexit gap near 0.8120.
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