It appears that EURGBP sellers have cleared range support at 0.8745. It’s a level I have mentioned a few times in recent weeks including this past Monday.
We’ve been waiting for a break from this 270 pip range before making any further considerations. There were, however, a few opportunities to trade the range including the November 1 bullish rejection candle and the November 15 bearish pin bar.
On Monday, I pointed out that a move lower seemed likely given the impulsive nature of the September decline. This multi-month range was therefore corrective which meant a move lower was the most likely outcome.
Given Thursday’s close below 0.8745, I would suspect that sellers will defend the level as new resistance. Per Monday’s commentary, the next key support doesn’t come in until 0.8600.
However, there are a few things to keep in mind here.
First is the fact that these levels are sometimes considered areas rather than an exact price. So even though I write 0.8745, the area could extend as low as the November 1 low at 0.8732.
Second, it’s Friday. I’m not so concerned about the upcoming non-farm payroll as crosses like the EURGBP have a way of absorbing USD volatility. But putting on any trade with less than 24 hours before the weekend isn’t good practice.
Last but not least, the 10 and 20 EMAs are 80 pips above the current price. That means we could see some consolidation or even an intraday spike above 0.8745 before the next leg lower materializes.
I’m going to hold off, for now, to see how Friday’s session reacts to the new resistance area. I also don’t want to take on any new exposure ahead of the weekend.
As long as the 0.8745 area holds as new resistance on a daily closing basis (5 pm EST), I will remain bearish. I will also be on the lookout for a favorable selling opportunity next week as long as sellers maintain control into the weekend.
The first key support comes in at 0.8600. A daily close below that would pave the way to the target for this 270 pip range break at 0.8470.