EURGBP broke below a key support level yesterday.
On January 4th, I mentioned a wedge pattern that could produce a 400 pip move for the euro cross.
We viewed the pattern on the weekly time frame. However, Thursday’s close below wedge support could be the first sign of an extended move lower.
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That said, there are two things I’d like to see first.
One is a weekly close below wedge support. Right now that level comes in at 0.8700.
The second is a retest of former support as new resistance. Again, that’s where the 0.8700 area comes into play.
My reason for these requirements is simple.
The EURGBP is a cross that’s known for being sporadic at times, and so far January has been a challenging month for reading price action.
Waiting for the weekly close followed by a retest of the area will help confirm the breakout thus providing a more reliable setup.
I’m also in no hurry to trade.
I haven’t opened a position in two weeks because of how choppy and unfavorable the price action has been so far this year.
So for now, I’ll wait. A weekly close below 0.8700 followed by a retest of this new resistance area next week could produce a favorable short opportunity.
If sellers can get through the 2018 low at 0.8620, we could see EURGBP slide toward the 2017 low at 0.8300. That’s the inception point of this wedge.
Alternatively, a close back above former wedge support near 0.8700 would negate the idea.
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