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- EUR/GBP Technical Strategy: Pending Short
- Support: 0.8165 (61.8% Fib exp.), 0.8121 (76.4% Fib exp.)
- Resistance: 0.8200-14 (50% Fib exp., channel bottom), 0.8235 (38.2% Fib exp.)
The British Pound soared against the Euro, pushing EUR/GBP through multiple layers of support and taking out a rising channel bottom set from late January to suggest the long-term down trend has resumed. A break below the 61.8% Fibonacci expansion at 0.8165 exposes the 76.4% level 0.8121. Near-term resistance is in the 0.8200-14 area, marked by the 50% Fib and the channel bottom. Reversing above that targets the 38.2% expansion at 0.8235.
A short position targeting 0.8165 with a stop on a daily close above 0.8214 requires an entry price no lower than 0.8190, making current positioning acceptable from a risk/reward perspective (assuming at least a 1:1 ratio). Chasing the pair lower after the largest single-day drop in two months seems ill-advised from a tactical perspective however. We will wait opt to hold off a bit, allowing the pair to digest recent volatility before taking directional bets.
Daily Chart - Created Using FXCM Marketscope 2.0
--- Written by Ilya Spivak, Currency Strategist for DailyFX.com