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EURGBP bulls are on the move again following the September 27th retest of 0.8744. This area served as support in mid-July just before buyers extended the rally above the 0.8925 handle.
That level is being tested today as resistance. You can see in the third chart below how it served as a pivot between July 11th and August 3rd.
Before we get to that, I want to turn your attention to a much broader level.
The trend line that extends from the November 2015 low is what triggered last month’s bounce. Of course, the 0.8744 horizontal level also played a role, but the weekly trend line shown above appears to be the primary driver.
You may recall the commentary from late August. In that post we discussed how the 0.9270 area would likely act as resistance. Just three sessions later the EURGBP carved a bearish rejection candle from the same channel resistance.
Then came the September 12th break of channel support. The breakdown not only served as an opportunity to get short, but it also exposed the 2015 trend line in the chart above.
At the moment the Euro cross is giving off mixed signals. On the one hand, the pair has been (and still is) in an uptrend since mid-2015.
But on the other hand, buyers are struggling to carve proportionally higher highs. Take the trend line in the weekly chart above and then draw a line that connects the October 2016 high with the high from August of this year to see what I mean.
In the near term, the 0.8925 area will likely attract an influx of offers. Any bearish price action from here could provide an attractive short setup.
However, I have a sneaking suspicion that bulls want to take prices to 0.8980. This area served as resistance back in late July and subsequently attracted bids on the 12th and 13th of September.
I’m going to hold off to see what kind of price action we get at 0.8925. A daily close (5 pm EST) above it would open the door to the next resistance level at 0.8980. This too is an area that could produce a favorable selling opportunity.
As long as 0.8980 holds as resistance on a daily closing basis, I will maintain the idea that a major reversal is likely. Given the location of the weekly swing highs and lows since 2015 (see chart above), it appears EURGBP bulls may be ready to capitulate.
Key support from here comes in at 0.8744 followed by 0.8600. The latter will be my target should we get a favorable short setup in the coming days.