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The EURGBP has been a tough pair to figure out.
The aggressive rally in mid-December looked constructive for buyers, but the bid dropped out on December 31st.
We saw the EURGBP retest the breakout trigger at 0.8590 on January 14th.
However, sellers held their ground for a second time in three weeks.
The recent selloff has brought the euro cross back to the 61.8% Fibonacci retracement of that mid-December rally.
Speaking of Fibonacci, something interesting is at work here.
If we measure the latest move lower between August and December of last year, the 38.2% and 50% levels line up perfectly with key levels.
And not just any key levels, either.
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I’ve had the 0.8800 and 0.8680 levels on my chart for weeks. You can see both of them on any EURGBP analysis in the last month or so.
The way these two levels line up may seem trivial at first.
But congruence like this can be incredibly helpful for a trader.
It tells us that there is a decent chance the EURGBP put in at least a short-term bottom last December.
Now, just like any trading strategy or technique, this is not a perfect one-size-fits-all approach.
Just because the 38.2% and 50% levels match up with key price action levels does not mean the pair will move higher from today’s price.
Then again, this isn’t an untested approach, either.
I used this same technique to catch the top on GBPJPY in September 2015.
Here’s the chart I posted with the title, Major Top in Place for GBPJPY?:
And here’s what happened next:
That was a 6,400 pip selloff from the time I published that blog post on September 9th, 2015.
As nice as this looks, it does not mean the EURGBP will take off higher without looking back.
There are no guarantees in this business.
This idea is also more speculative than most on this website, especially considering EURGBP bulls haven’t done much lately.
If you want to play this one a little safer, which is never a back idea, you can wait for a daily close above 0.8590.
I still think that’s the resistance level that needs to break to confirm a bottom for EURGBP.
Other key resistance levels to keep an eye on include 0.8680 and 0.8800.
Alternatively, a daily close below 0.8385 would cast a bearish shadow over the pair for next week.