EUR/GBP has rebounded modestly towards the 50-day Simple Moving Average after having tested the lower part of the downward sloping trendline that has been in place since last summer. Price has now rallied 150 pips from the January 22nd low of .8167 and also made a higher high last week. If we continue to see the euro exhibit bullish behavior immediate upside targets include the 100-day SMA at .8369 which would then be followed by the psychological .8400 handle.
Price action is also displaying a potential bearish Gartley pattern that may test the upper boundary of a falling wedge. If we do not see the immediate reversal around Point D, the falling wedge might help confirm the next leg up and potentially ending the bearish trend. With the news remaining problematic in Europe and the Bank of England likely not shifting the markets bias of tightening occurring sooner than later for London, EUR/GBP sellers may be eager to rejoin this favorite short.
The trade: Sell EUR/GBP at .8375, with a stop loss at .8425 and a take profit at .8250. The Risk/Reward Ratio is 1: 2.5
Edward J. Moya
WorldWideMarkets Online Trading