3 weeks ago I wrote about how the EUR/GBP was at a key resistance level based on a descending channel and key Fibo levels, namely the 50% level from the high in 2008 to the low in July 2012. I am sure that I am not the only trader that saw this and felt a short position was the way to go. Unfortunately for those who were charmed by this chart analysis, the short positions did not work right away as the pair has been very resilient to fall, and in fact appears to now be climbing towards the next key level, 0.9019. This level is the 61.8% retracement level for the period mentioned earlier, and a place where market movers have corrected the price many times previously. Friday the daily chart closed as an 'inside bar' set-up, suggesting a break of the high will bring on further bullish action above 0.8742 with the first area of resistance being last week's high of 0.8812. If this happens, we will look for Resistance at 0.8775 where the 50% level officially sits alongside the Weekly R1 before hitting testing last week's high, and then 0.8925 will be the next area of resistance to contend with. If the opposite happens, and it could as prices will often 'correct' themselves on Monday/Tuesday after a big move in the previous days, watch for support at the well established level of 0.8670 on the way down to the Monthly Pivot/Weekly S1 at 0.8616 and possibly the 38.2% level at 0.8563 further down. This pair does appear to be bullish overall, but bear in mind that the Monthly Candle for February closed as a mediocre pin bar reversal, and we could just be retracing higher in order to fall further, after a few more stops are taken out.
Happy Trading