Since the Brexit-inspired break above eight-year channel resistance, the EURGBP has been confined to a 400 pip range between 0.8330 and 0.8715. Just yesterday the pair tested the August highs near 0.8715 before selling off into the close.
The monthly chart below shows the eight-year pattern along with the breakout that took place in late June.
Monday’s end-of-day weakness has carried over into today’s session with the Euro cross now off its highs by more than 80 pips. This decline turns our attention to 4-hour ascending channel support, which comes in near 0.8630.
While a retest of this area may offer a buying opportunity, the critical resistance area at 0.8715 is too close to current prices to provide a favorable risk to reward ratio. Also, given yesterday’s retest of the range ceiling, a close below channel support could signal a continuation of the current range, which could eventually target the 0.8330 handle.
I also have a contingency plan in the event the pair finds a bid at channel support for the third time. However, I’m going to hold off on releasing that idea until we see how things play out over the next 24 to 48 hours.
I’m on the sidelines for now until a favorable opportunity presents itself. Key support comes in at 0.8535 along with range support at 0.8330.
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