EUR/GBP Technical Analysis: 3-Month Trend Line Broken
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Talking Points:
EUR/GBP Technical Strategy: Flat
Euro breaks 3-month trend line, hints down trend vs. Pound is resuming
Looking for improved risk/reward parameters to trigger short position
The Euro moved lower against the British Pound as expected, breaking rising trend line support set from mid-November 2015. The pair signaled topping with the formation of a bearish candlestick pattern reinforced by negative RSI divergence.
From here, a break below the 23.6% Fibonacci retracement at 0.7705 opens the door for a challenge of the 38.2% level at 0.7567. Alternatively, a reversal above rising trend line support-turned-resistance – now at 0.7805 – paves the way for another test of the February 24 high at 0.7928.
The break of trend line support suggests the multi-year EUR/GBP down trend is resuming, in line with our 2016 fundamental forecast. Prices now sit squarely at support however, making it unattractive to enter short from a risk/reward perspective. With that in mind, we will remain on the sidelines for now.
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