The long term EUR/GBP price action is getting extremely bearish, especially after the breakout of 200-period moving averages.
Today is Friday and perhaps not the best day to initiate a long term sell trade. Although Monday could be the perfect timing for that because we could also confirm that the daily closing price will be below the 0.8756 level.
Disclaimer: The analysis presented in this article is for educational purposes only and should not be considered as financial advice.
This analysis was done on MetaTrader 4.
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Trade Idea Details:
Key support levels: 0.8680, 0.8412
Key resistance levels: 0.8640, 0.8564
Price Action: On the Daily chart price broke below the 200 Simple and Exponential Moving Averages suggesting long term price weakness. Currently, the price corrected up and 200 SMA is being rejected. 0.8756 level would be an important price to watch on the daily chart, as daily close above this level could push the price up, towards 0.8860 previous resistance.
The 4-hour chart shows that the 200 EMA breakout level at 0.8850 area has been acting as a strong resistance, while the price rejected this level multiple times. We can see that 61.8% Fibs resistance, as per the daily chart, is still holding. There was a spike above, reaching 0.8768 level, although the price failed to close above the Fibonacci level. This means that 0.8768 could be the level of interest for sellers which might provide a great selling opportunity for the long term. Nevertheless, it is important to watch the daily closing price, because, in order to validate the downtrend, it must remain below the 0.8768.
On the 1-hour chart, we have applied the Fibonacci retracement indicator, which means that price might re-test either 50% at 0.8766 or 61.8% Fibs at 0.8788 prior to the downtrend. However, as we can see, on the April 23rd, EUR/GBP has broken below the 200 EMA, corrected up and rejected 0.8766 level. This is the exact level where the 50% Fibonacci retracement level is located currently.
Potential Trade Idea: The selling opportunity will remain attractive while EUR/GBP price is within 0.8740 – 0.8765 area, which is between two Fibonacci resistance levels. The downside target could be potentially seen at 0.8414, which is a possible 320 pip price drop. The downside target level would be confirmed by two Fibonacci retracement levels per the daily chart and should be ideal for the long term profit-taking. In regards to the exit signal, a daily close above the 0.8862 resistance will invalidate bearish outlook and EUR/GBP price will most likely continue moving north.