I see a classic chart pattern forming on the 4-hour chart of the EUR/GBP pair!
Will we see a trend reversal soon?
Check out the near term resistance I’m watching:
EUR/GBP currency pair on 4-hour chart Chart by TradingView
The Bank of England’s decision to cut interest rates has sent sterling sharply lower against the euro, as slowing core inflation has persuaded some MPC members to ease monetary policy.
This was enough to lift the EUR/GBP pair above the minor psychological level of .8450 and approach the major psychological level of .8500, creating a double bottom pattern on the 4-hour time frame.
Will we see a neckline breakout and reversal from here?
Remember that directional biases and volatility in market prices are usually driven by fundamentals. If you haven’t done your homework on the Euro and the British Pound yet, it’s time to take a look at the economic calendar and stay up to date with the daily fundamental news!
Continued downward pressure on GBP could push the pair beyond the R2 (.8480) level and into an upside breakout of the longer-term area of interest, which could spark a rally that could continue as high as the formation or closer to 100 pips.
On the other hand, holding the resistance could send the EUR/GBP pair to near-term support areas at R1 (.8460) or to lows near S1 (.8400).
The 100 SMA is below the 200 SMA suggesting that the path of least resistance is to the downside, but it is also worth noting that the price is above both moving averages as an early indicator of a trend shift in favor of the bulls.
No matter how you trade this setup, make sure you follow your trading plan and use the best risk management moves so you can trade another day!
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