In the short term, EUR/GBP still looks extremely bearish and we could see a potential fast decline towards previously formed support area near 0.8690.
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: 0.8692
Key resistance levels:0.8767, 0.8789
Price Action: In continuation of our long-term EUR/GBP idea, here comes the short term price perspective, which seems extremely attractive considering current price action.
On the 4-hour chart, EUR/GBP has been struggling to break above the 200 Exponential Moving Average. At first, it was rejected cleanly, then price produced the spike above but failed to close higher. What we see today is yet another clean rejection of the 200 EMA, which should result in yet another wave down.
On the 1-hour chart, the RSI oscillator formed a bearish divergence, went down, and then on the correction up rejected the 50% Fibonacci retracement level. This was a very clean bounce off the 0.8767 resistance, after which EUR/GBP produced yet another lower low.
Therefore, as long as the price remains below the 0.8789 level, EUR/GBP will move down to test the key support level at 0.8693. This level is confirmed by two Fibonacci retracement levels, first being 88.6% of the April 30 – May 04 wave up. The second is 261.8% Fibs applied to the current corrective wave up.
Potential Trade Idea: The selling opportunity is open, the ideal short entry would be between 0.8755 and 0.8765 with a possible Stop loss near 0.8789 and potential Take profit target close to 0.8693.