Monday starts for us with a very nice and technical setup on the EURGBP pair. The situation there is pretty clear and neat without any unnecessary fireworks. Before we get into the details here, let me first show you what happened with our previous analysis of this instrument. This was on the 14th of January, when the pair was trading at 0.892. Back then, we had a bearish outlook, and I wrote the following:
“As long as we stay below the lower green line, sentiment is negative, and we should see a further decline. Our target is on the yellow horizontal support, so 270 pips lower. Quite promising, right?”
270 pips, right? On the 25th of January, the price was around 300 pips lower and that is our local low for now. We’re usually very modest, but you have to admit that this was a great call! Since making that low, we’ve been seeing bullish correction. The initial phase of the correction was shaped like a wedge (blue) and did not surprise traders because it ended with a bearish breakout. After that, the price created another wedge, but this time significantly smaller (purple). This one should end up with a bearish breakout too and that is our latest outlook on this instrument.
If you want to play it safe and you are not totally convinced by the sell signal, you can wait for a breakout of the light blue horizontal support first. As for a target, we can look towards the green line around 0.863, i.e. the lows from January. The sell signal will be cancelled if the rate breaks above the top of the blue wedge, which is currently not very likely to happen.