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On August 19, I wrote about a potential top for EURGBP.
The pair had just carved a bearish engulfing pattern on the weekly time frame after 14 consecutive weeks of gains.
That’s an ideal combination for a reversal.
Sure enough, a look at the weekly time frame nearly four weeks later shows a completely different picture.
So far, that engulfing pattern has triggered a pullback of nearly 300 pips as of this writing.
It has also produced a five-week losing streak as of last week’s close.
And if we turn to the daily time frame (below), you can see the nice stair-step action since the pair put in a top in mid-August.
Each key level you see below has served as resistance following a close below it including 0.9180, 0.9090, 0.9015, and 0.8920.
That 0.8920 area, by the way, was our target that I wrote about on August 27.
So what’s next for EURGBP?
As long as the euro cross is carving lower highs and lower lows, I have to favor shorting the pair.
In other words, as long as sellers keep prices below 0.8920 on a daily closing basis, I will continue to watch for selling opportunities.
However, there isn’t much space between these key levels.
That means you have to be precise with your entries if you intend to secure a favorable risk to reward ratio.
For now, though, I prefer waiting for a retracement into that 0.8920 region.
That’s where the mean (average price) is on the daily time frame as illustrated by the 10 and 20 EMAs in the chart below.
It’s also the location of several closing prices and lows since late July.
Just keep in mind that nothing lasts forward.
While I’m staying bearish the EURGBP while below 0.8920, nothing says the pair has to remain below that level.
If buyers do force a daily close above 0.8920, it will trigger at least a temporary respite in the selling pressure.
It would also re-expose 0.9015.
At least that’s my take on the situation.
But as long as 0.8920 is intact as resistance, I favor a lower EURGBP toward 0.8840, 0.8760, and perhaps even 0.8680.