The EURGBP has been on a tear since coming off nine-month support at 0.8315. This was the level that appeared to be the neckline of a head and shoulders pattern back in April, but the pair never confirmed our suspicion.
Just hours ago the Euro cross tested another critical level, this time 829 pips higher at 0.9144. This was last year’s high and is also very near the high from 2010.
Shortly after carving a session high of 0.9142, the EURGBP sold off sharply and is currently hovering just above the 0.9100 handle. But despite the sharp intraday selloff, the pair is holding steady and the rally that began in mid-July still looks relatively healthy.
However, there is a pattern forming on the 4-hour chart that signals a bit of exhaustion from buyers. The rising wedge that extends from the July 17th low is well worn, and the bulls are starting to run out of real estate.
But like all patterns, especially those that are terminal, it’s important to wait for a break before further consideration. Because although this rising wedge signals exhaustion, it doesn’t mean that buyers will capitulate thus relinquish control.
It’s going to take a 4-hour close below wedge support near 0.9070/80 to confirm that a move lower is likely. Such a break would first expose 0.8990 followed by 0.8895 with the final target being the July swing low at 0.8745.
Alternatively, a daily close (5 pm EST) above the horizontal resistance at 0.9144 would negate the idea that buyers are tiring.
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