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EURGBP bulls are once again putting pressure on key resistance at 0.8980. I mentioned this level last Friday after buyers failed to retake it in the previous session.
The sizeable bearish rejection candle on October 12 suggested an influx of selling pressure in the region. However, the price was too low at the time to consider an entry. Instead, we were looking for retracements into the 0.8980 area.
Today’s price action is doing just that. So the question becomes, is now the time to sell?
I think the jury is still out. Yes, the EURGBP is retesting key resistance at 0.8980, but it’s doing so after several days of churning below the level.
When pursuing a 50% entry of a candle like October 12, I like to see the retracement occur within the first 24 to 48 hours. With that said, downside targets remain exposed as long as 0.8980 holds as resistance.
If you do decide to sell at current levels (0.8983), I suggest you use today’s close as a decision point. In other words, if the pair sells off into the close , stay in the position and perhaps even trail your stop.
On the other hand, if the pair closes above 0.8980 at 5 pm EST, you probably don’t want to be short. It may sound risky selling into today’s strength, but after a 60 pip run on the day, the risk is actually quite low.
As long as sellers manage to keep prices below 0.8980 on a daily closing basis, I will maintain a slightly bearish bias. This is due to the break of ascending channel support on the 12th of September. A move lower from here would likely encounter buying pressure at 0.8744.
Alternatively, a daily close above 0.8980 would expose last week’s high at 0.9032. It would also delay the bearish scenario described above.
Don’t forget about the larger pattern here including the trend line that extends from the November 2015 low. A close below that support level would be a significant development for the Euro cross. See this post for more.