While most currency pairs have been extremely volatile in the past few weeks, EUR/GBP has been moving sideways. Now there is an exemplary trading signal, showing a possible move downward from a resistance.
Consolidation trading signal
EUR/GBP has clearly bounced from the 0.8550 support to the current 0.8800 in just a few days. However, this level is another chance for short sellers to enter trades. The OsMA indicator usually points in which direction will the market go in consolidation markets, which now shows the currency pair might be headed to the downside.
Also read: USD/CAD in trouble – is another decline on the way?
However, a confirmation signal is needed. For example, an engulfing pattern or a pin bar on a daily time frame would be sufficient as a signal to enter the trade. But traders need to be aware this signal may still be false if EUR/GBP rises above the level in the next 1-2 days.
EUR/GBP daily chart, author’s analysis, source: tradingview.com
The four-hour timeframe shows how the currency pair broke a trend line, suggesting the selloff may be right ahead of us. Shortly, there should be enough opportunities to jump into the short position, but traders should stay cautious because if the sterling weakens against all currency pairs, it could draw EUR/GBP much higher.
EUR/GBP 4-hour chart, author’s analysis, source: tradingview.com
So right now, traders have an opportunity to short EUR/GBP with a stoploss around 80-90 pips. But there is a potential profit target of approximately 250 pips all the way to the support level and a trend line.
Read more: Last week of trading kicks off with tech decline
Conclusion
If EUR/GBP rises above 0.8850, the market could rise a few hundred pips as the closest resistance is at a price of 0.9277. That is why it’s crucial to wait for the confirmation signal as the currency pair may jump in any direction.
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