EUR/GBP escapes from the rectangle

EURGBP finally ended the sideways trend that was present on the chart since the 7th 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.

EURGBP

First signs of bullish problems could have been seen on the 3rd 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)

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