The EURGBP continues to consolidate following the October 7th selloff in the British pound. And although a few sessions in recent weeks saw the currency cross lose more than 100 pips, I would argue that this is healthy consolidation.
Of course, that could change, but at the moment this pullback looks mild compared to the run-up that began on September 6th.
On October 19th I stated that the bullish bias is intact above 0.8870. So far the last week of trade has produced a low of 0.8880 so that bias hasn’t changed.
To get a better grasp on what’s happening here, you’ll want to review the commentary at the link below.
In that commentary, I also pointed out the confluence of support in the 0.8870/80 area. Let’s plot those same levels on an updated chart.
As you can see, the pair tested former channel resistance between the 21st and 25th of October. We also got a couple of 4-hour bullish pin bars from yesterday’s retest of the trend line that extends from the September 6th low.
Like most things we do here, there are a couple of ways to approach this. The first is what I just mentioned above with former resistance now acting as support. The bullish price action in this area could offer a compelling buying opportunity.
But the pair also appears to be getting “squeezed” by the 4-hour price structure in the chart below. And the longer this consolidation continues, the more volatile the ensuing breakout is likely to be; although market participants are quickly running out of real estate.
Support now shifts to the 0.8900 handle while resistance comes in at the 2010 high of 0.9140 followed by the October 2009 high near 0.9400.
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