On January 13th, I pointed out a potential EURGBP reversal. The idea hinged on the 0.8590 horizontal level.
A daily close above that level would set the pair’s sights on 0.8680 and perhaps even 0.8800.
The “daily close” refers to 5 pm EST when using New York close charts, which is what I recommend for trading price action.
Go here to get access to the same Forex charts I use. These charts are essential for trading price action.
However, notice where Tuesday’s session fell short.
The EURGBP never managed to close the day above 0.8590, which caused the pair to rotate lower throughout the week.
But don’t dismiss a higher EURGBP just yet.
Despite Tuesday’s failed attempt to break above 0.8590, the euro cross showed resilience on Friday.
Notice the long lower wick of Friday’s candle.
That wick appears to have been in response to the descending channel top that extends from the 2019 high.
Here’s where things get tricky, though.
There is often more than one way to draw the channel below.
If you start with the August 2019 high and connect it with the October high, it looks as though the EURGBP is below the level.
That would suggest that it is serving as resistance.
On the other hand, if you start with the October and December 2019 lows and connect the upper level with the 2019 high, the channel top is support.
So which is it?
In many cases, it’s both.
But don’t think that contradictions like this only apply to technical patterns like channels.
The market is full of them!
It’s the reason trading is such a subjective game, regardless of whether you use technicals or fundamentals, or a combination of the two.
The easiest way to determine whether the channel top below is serving as support or resistance is to watch how the market responds next week.
It’s as simple as that.
Furthermore, I stand by the idea that EURGBP needs to close the day (using New York close charts) above 0.8590 to confirm the bullish outlook.
I also think a daily close below 0.8450 would suggest weakness.
With that in mind, waiting for either a daily close above 0.8590 or below 0.8450 may be the best approach here.
A close above 0.8590 would expose 0.8680, followed by 0.8800.
Alternatively, a close below 0.8450 would target 0.8400, followed by 0.8300.
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