EURGBP: Reversal on long term bearish resistance and break below support
The daily candle chart shows EURGBP reversing on a long term bearish resistance line (point 6) yesterday and closing just off the low and very near where the pair is trading as of publication around .8605.
A very short term bullish support line (point 1) has failed to support the EURGBP pair which may now target a medium term support line (point 4) or short term bullish channel (point 3) just below –unless this short term line can be regained (point 1).
If this bearish reversal is genuine (on point 6) the EURGBP pair may follow a very short term bearish resistance line similar in slope to those observed previously (point 5) within this bearish channel (point 6) or follow a less-bearish short term resistance line (point 2) which could also repeat as well.
If this reversal is not genuine and the bullish support line (point 1) is regained or support is re-established on the medium term support line (point 4) or on the short term bullish channel (point 3) then EURGBP could return to test the long term resistance line again(point 6). If it breaks above then .8700 could be a target in the very short term.
Although the very short term momentum has been bullish - over the medium term the trend has been mixed with prices consolidating into a symmetrical triangle formation which eventually broke to the upside before returning to find support along the short term bullish channel in mid June 2013 and as discussed in a previous article on the EURGBP:
Below are examples of how to trade a bearish continuation of the previous two candles or a bullish reversal:
1. BULLISH BUY ENTRY ORDER: Create a “Buy Entry Stop” @ .8647 with a profit limit @ .8693 and a stop-loss @ .8611 Risk/Reward Summary: Limit risk = +46 pips profit / (-36 ) Stop-loss risk = Gain to Loss ratio = 1.28
2. BEARISH SELL ENTRY ORDER: Create a “Sell Entry Stop” @ .8595 with a profit limit @ .8569 and a stop-loss @ .8620 Risk/Reward Summary: Limit risk = + 26 pips profit / (- 25 ) Stop-loss risk = Gain to Loss Ratio = 1.04