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On February 12 I pointed out a wedge pattern on the EURGBP that could produce a breakout opportunity. That break came on March 1 and former wedge resistance was tested as new support between the 12th and 13th.
However, the level gave way on Wednesday and was once again serving as resistance by Thursday’s session.
For those wondering why this wasn’t a buy, there are two reasons that come to mind. The first is that there was no buy signal. Although Monday and Tuesday held above the level, neither formed a bullish pin bar or even a rejection candle.
The second point is that, as I mentioned on February 12, the velocity of the selloff last September raised some doubts about a potential bullish scenario here.
So despite the descending wedge (usually a bullish sign), I wasn’t willing to commit capital, at least not without some form of bullish price action.
With the EURGBP now back inside this wedge pattern, it may be time to begin looking for short entries. In my opinion, Thursday’s retest of wedge resistance at 0.8860 was a valid area to short the Euro cross.
But in case you missed it, the pair is retesting another level that could produce an opportunity next week.
The short-term trend line that extends from the January 25 low has come under pressure in the past 24 hours. In fact, it has already broken down on the 4-hour chart.
If sellers can maintain these levels and close the pair below 0.8825, it would signal a short opportunity for next week. The 0.8825/30 area would become resistance with the lower portion of this wedge serving as the target somewhere near 0.8670/80.
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