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Is this the start of the next leg lower for EURGBP or a bullish breakout?
Watch the video below to see what I think.
Don’t forget to scroll down for more commentary and an annotated chart.
EURGBP is approaching a key inflection point at 0.8920.
I mentioned the pair and pointed out this area in Saturday’s Forex Forecast video.
You can see how this area is the intersection of a horizontal level that dates back to June and descending channel resistance.
This was also our target following the EURGBP topping pattern that materialized earlier this year.
The 0.8920 region was also the focal point in my September 23 post.
I even wrote that a 0.8920 retest would be ideal when EURGBP was trading above channel support at 0.8840.
Now the question is, should we sell EURGBP or wait for a break higher?
Just because the pair is testing the confluence of resistance at 0.8920 does not mean sellers will win the battle.
Channels like the one below break all the time.
In fact, channel breakouts are one of my favorite methods of trading the Forex market.
With that said, here’s how I’m approaching EURGBP.
If we get some form of bearish price action such as a pin bar, I will entertain a short from 0.8920 resistance.
However, if bearish price action does not materialize, I will stand aside and wait for a close above resistance.
Simple enough, right?
I do think we could see EURGBP back to 0.9015 and perhaps even 0.9090 if buyers can close the pair above channel resistance near 0.8930.
On the flip side, a move lower from 0.8920/30 resistance would target 0.8840 with a close below that exposing 0.8760 and 0.8680.