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We have two really nice setups to talk about today in EURGBP and GBPCHF. Let’s start with the bearish of the two – EURGBP.
The pair has been in a holding pattern for the past several months after losing nearly 1,000 pips since August of 2013. During that holding pattern, the pair formed a wedge which broke down on December 18th. That breakdown created a short opportunity that Daily Price Action members were able to capitalize on.
EURGBP made yet another break yesterday, falling below the .7765 key horizontal level. This break is much more significant than the wedge break on December 18th.
From here we can watch for a retrace back to .7765 for an opportunity to sell. Under most circumstances I would require bearish price action, however given the significance of yesterday’s break, I’m leaving my options open for a blind entry from this level.
Looking lower, the next level of key support comes in at .7690. However I won’t be overly interested in liquidating my position at this level. Instead I will look to pyramid into this trade all the way down to my final target.
What is my final target, you ask? Great question. Here’s a look at the monthly chart…
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Summary: Wait for a retrace back to .7755 to trigger a short trade. Alternatively, a 4 hour close below .7735 may indicate that a retrace isn’t likely and that a short entry at market may be a viable option. Key support comes in at .7690 with a final target for the year of .7255.