By: John Ursus
Timeframe: W1
Recommendation: Long Position
Entry Zone: 0.7875 – 0.7950
Take Profit Zone: 0.8350 – 0.8425
Stop Loss Zone: 0.7625 – 0.7700
The EURGBP has reversed over the past twenty-three trading months as forex traders sold off the Euro and bought the British Pound; this combination accelerated the sell-off amid a sharp contraction in economic output out of the Eurozone while the United Kingdom managed to expand at a slower pace. The correction took this currency pair from an intra-day high of 0.8815 to an intra-day low of 0.7766 from where the EURGBP was able to halt the sell-off and stabilize. This currency pair could face a short-covering rally amid oversold conditions.
The sell-off took the EURGBP below its 38.2 Fibonacci Retracement Fan, but the move was stopped by the formation of a double bottom formation. A short-covering rally is expected to take the EURGBP back into its 38.2 Fibonacci Fan from where more upside is possible. Forex traders are advised to spread their entries over a 75 pips range between 0.7875 and 0.7950. The downward potential appears to be rather limited while the upside potential remains very attractive.
