Important: This site uses New York Close Forex Charts so that each 24-hour session starts and ends at 5 pm EST. These charts are essential for trading price action.
On August 19th, I wrote about a potential EURGBP top.
Although the uptrend was technically still intact, there were two reasons I liked the idea of looking for EURGBP shorts this week.
The first signal occurred on the weekly time frame.
Last week’s range engulfed the previous one, forming a bearish engulfing pattern on the weekly time frame.
That pattern, by the way, also brought an end to the 14-week win streak.
The second reason I was becoming relatively bearish EURGBP had to do with what was happening on the 4-hour time frame.
Although I don’t like to play a head and shoulders pattern on the intraday charts, I also couldn’t ignore what was happening.
Be sure to read Monday’s post if you haven’t already.
As you can see, EURGBP is already breaking below the 0.9090 area I wrote about earlier in the week.
Also, remember that 0.9180 to 0.9200 resistance area I pointed out on Monday?
Notice how Tuesday’s session topped out at 0.9183 and closed 63 pips lower at 0.9120.
That’s no coincidence. It’s evident that sellers were hanging out around that 0.9180 mark as I thought they might.
Fast forward to today, and you can see how EURGBP is now trading below 0.9090.
Remember that 0.9090 was the level sellers needed to break in order to extend this latest selloff.
That said, I do expect the mid-July highs near 0.9040 to attract buyers on the way down.
But as long as 0.9090 holds as new resistance, the EURGBP appears to be heading for the July lows near 0.8915.