I haven’t discussed the EURGBP for quite some time. The consolidation that began last October has kept me on the sideline in search of other more favorable technicals.
However, the Euro cross is nearing a point where things could get interesting. The four months of consolidation has carved a descending wedge pattern that could offer a breakout opportunity in the coming days.
While the descending nature of this pattern suggests a break higher, the selloff last September does raise some doubt about the pair’s ability to climb higher.
In these situations, it’s best to let the market make the first move. So instead of trying to guess whether it’s a bullish or bearish structure, I’ll wait for a break from consolidation.
A daily close (New York 5 pm EST) above range resistance near 0.8900 would set the stage for a move higher. The 0.9030 handle would be a level of interest along with the 2017 high at 0.9300.
Alternatively, a daily close below range support near 0.8670 would expose downside objectives including 0.8580 followed by the 2017 low at 0.8310.
Keep in mind that those range boundaries at 0.8900 and 0.8670 are moving targets. The longer the EURGBP consolidates, the more those levels will change.
For the range traders out there, you could also consider selling retests of resistance and buying retests of support. Just bear in mind that you will eventually get caught on the wrong side of the market when this thing breaks out.
I’m going to keep an eye on this one, but it isn’t at the top of my list. Right now I’m more interested in the yen crosses such as the EURJPY and GBPJPY. Even the AUDJPY price action of late has caught my attention.