EUR/GBP Developing a Double Top; Reward to Risk Assessment

eurgpb

  • Day: The daily chart shows the EUR/GBP going up against a declining trendline.
  • The market is reacting by pausing the rally at 50% retracement, 0.8350 level.
  • Note the RSI is remaining under 60 for now and is turning lower.
  • The 0.8400 area is 61.8% retracement, and is the resistance zone for this pair. Will the market extend a little further ? Or will there be topping action here at 0.8350?
  • In any case, the bearish scenario is invalid if the market breaks above the 78.6% retracement area and previous support at the 0.8450/60  area.
  • If the bearish scenario follows through, we have 2 suggested swing projections that target the zone between 0.7850 and 0.7950.



eurgbp

  • 4H: The 4h chart shows the market in a possible double top development. The market needs to break below 0.8300 for the double top to be established.
  • Even after a break, there is a possible rally when the market tests the previous resistance area as support (0.8280).
  • Watch for a pullback, and if the pullback does not rally above the middle of the double top (0.8325), then the market confirms the topping action and suggests a decline towards at least 0.8230 area (61.8% retracement).
  • The 0.82 area is the ultimate test of the bullish scenario, which is possible as the RSI signals bullish momentum, and the market did breakout above 0.8280 area. That is why that is an important pivot to monitor.
  • If the market can break below 0.8200, then looking back at the daily, we have a possible swing projection.
  • Looking at the possible level for a stop (0.8465) and a possible target (0.7950), an entry near 0.8270 yields a reward to risk ratio near 1.6:1.