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Talking Points:
- EUR/GBP Technical Strategy: Flat
- Support: 0.8342 (23.6% Fib ret.), 0.8306 (38.2% Fib ret.)
- Resistance: 0.8399 (Mar 19 high), 0.8420 (38.2% Fib exp.)
Euro technical positioning hints a turn lower against the British Pound may be in the cards after prices put in a Bearish Engulfing candlestick pattern. The first layer of support lines up at 0.8342, the 23.6% Fibonacci retracement, with break below that exposing the 38.2% level at 0.8306. Near-term resistance is at 0.8399, the March 19 high, followed by the 38.2% Fib expansion at 0.8420.
Satisfying at least a 1:1 risk/reward ratio and using a stop-loss activated on a daily closing basis (as is the case with our strategy) calls for a short entry price no lower than 0.8368. While that is within a hair of the current market, we are mindful of the near-term upside bias implications of the break above trend line resistance set from August 2013 and will opt not to sell the pair.
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Daily Chart – Created Using FXCM Marketscope 2.0
— Written by Ilya Spivak, Currency Strategist for DailyFX.com