The EURGBP is pulling back after breaching channel resistance during the October 7th flash crash in the pound. This was technically an upward sloping flag pattern, which has bearish implications and plays out as such more often than not.
However, the unexpected surge earlier this month canceled out the idea of a bearish scenario developing anytime soon.
Now that the dust has settled and the pair has come off its recent highs, we can begin watching for buying opportunities in the direction of the trend. One area that I’m keeping a particularly close eye on lies between 0.8870 and 0.8880.
This is the intersection of former channel resistance (now support) along with the ascending trend line that extends from the September low at 0.8333. It’s also in the vicinity of our 10 and 20 EMAs, so confluence doesn’t appear to be an issue.
As for upside targets, the 2010 high at 0.9150 is sure to put up a good fight (again) followed by the October 2009 high near the 0.9400 handle.
Alternatively, a daily close back below former channel resistance would negate the bullish bias.
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