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Interesting Scenario Brewing on EUR/GBP

Interesting Scenario Brewing on EUR/GBP, FP Markets

Technically speaking, price action on the EUR/GBP cross has been rangebound since late 2016, which is evident on the monthly chart.

However, what this ranging action has offered technical eyes is a potential Head and Shoulder’s Top pattern to work with between £0.9306, £0.9504 and £0.9066 (if you wanted to be more technical, you might also refer to this as a complex Head and Shoulder’s Top given the two left shoulders). The pattern, as you can see, has yet to be completed as the right shoulder is still forming, but a neckline has been drawn in anticipation of pattern completion, extended from the low of £0.8313.

Nevertheless, drilling down to the lower timeframes on the daily chart, you will note that price action is in the process of chalking up an inverted Head and Shoulder’s Top pattern between £0.8513, £0.8498 and £0.8528, with a neckline drawn from the high of £0.8572.

What Does This Mean?

Should the daily chart’s pattern complete—rupture the neckline—this could see a moderate move to the upside. However, knowing that there is a possibility of the monthly timeframe eventually targeting a break of the Head and Shoulder’s Top pattern’s neckline, any upside move could be weakened on the daily timeframe.

Resistance on the Daily Timeframe?

Assuming we do indeed witness a breakout higher on the daily timeframe and price tests the projected inverted Head and Shoulder’s Top pattern’s profit objective at £0.8658, this, combined with the resistance zone located above it between £0.8671 and £0.8664, could be an area where the chart welcomes a sell-on-rally scenario based on what is being shown on the monthly timeframe.

Interesting Scenario Brewing on EUR/GBP, FP MarketsDISCLAIMER:

The information contained in this material is intended for general advice only. It does not take into account your investment objectives, financial situation or particular needs. FP Markets has made every effort to ensure the accuracy of the information as at the date of publication. FP Markets does not give any warranty or representation as to the material. Examples included in this material are for illustrative purposes only. To the extent permitted by law, FP Markets and its employees shall not be liable for any loss or damage arising in any way (including by way of negligence) from or in connection with any information provided in or omitted from this material. Features of the FP Markets products including applicable fees and charges are outlined in the Product Disclosure Statements available from FP Markets website, www.fpmarkets.com and should be considered before deciding to deal in those products. Derivatives can be risky; losses can exceed your initial payment. FP Markets recommends that you seek independent advice. First Prudential Markets Pty Ltd trading as FP Markets ABN 16 112 600 281, Australian Financial Services License Number 286354.

 

 

 

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