EUR/GBP escapes from the rectangle

EURGBP finally ended the sideways trend that was present on the chart since the 7^th of December. Since then, the price was locked inside of the rectangle pattern (green lines) in a tight range of 120 pips. Traders finally decided to go down and in terms of the risk to reward ratio, that can be a great trading opportunity.

First signs of bullish problems could have been seen on the 3^rd of January. Back then, the price tried to break the horizontal resistance with an aggressive upswing but eventually failed, which resulted with a long head on the H4 candle and a very strong pull back. With this movement, we got an information that the potential upswing may be a real struggle and the chances for that decreased significantly. Another problem came up on Friday, when the price created a shooting star on the green resistance. That was just too much for the demand and after this, they totally gave up. Obviously, the movement was coordinated with other pairs too – EUR was going down almost on every single chart.

Monday started with a small pullback, which tested the broken support as a closest resistance, so pretty much a typical technical movement. Test was positive for the sellers as the price created a nice bearish candle and after this, made new daily lows. As long as we stay below the lower green line, the 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?

Tomasz Wisniewski
Chief Analyst Alpari Research & Analysis Ltd (UK)