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We have a lot of great setups going into the new week, which promises to be eventful given the unfolding Greek crisis as well as the BoE report on Thursday. That said, let’s jump right in…
The first pair we’re going to look at is EURGBP. You may remember this one from last week, where we had a break of a bear flag pattern best seen on the 4 hour chart.
There were actually two breaks at play here, one that occurred on a steeper support level and a second that occurred on the ascending channel you see in the chart below. This first break was mentioned inside the DPA member’s area, which gave traders a chance to get in at an extremely favorable risk to reward ratio.
EURGBP 4 hour chart:
As you can see, the second break produced a bearish pin bar on the 4 hour chart. This was announced to members and non-members alike, giving everyone an opportunity to either enter short or add to an existing short position.
It’s worth noting that if we treat this channel as a bear flag pattern, the measured objective from the move puts us right at the .7257 key support level. This is the 2003 high as well as monthly channel support.
So where do we go from here?
Whether you’re already in this trade or not, the next key event area comes in at .7400. Therefore we should wait for a break and close below this level before looking at enter short on a retest as new resistance.
I do expect to see some sideways price action given the way last week ended and the fact that the BoE report doesn’t come out until Thursday. So unless the Euro sells off early in the week, we may see some sideways price action above .7400 before the next leg down.
Speaking of EURUSD, we’ll cover that one next.
Summary: Wait for a 4 hour or daily close below .7400 and then watch for a retest as new resistance before considering a short position. The next key support comes in at .7257.