EURGBP escapes from the rectangle

EURGBP finally ended the sideways trend that had been present on the chart since the 7th of December. The pair was locked inside a rectangular pattern (green lines) with a tight range of 120 pips. Traders finally decided to head south, and in terms of the risk-to-reward ratio, this could provide a great trading opportunity.

The first warning signs for the bulls could be seen on the 3rd of January. Back then, the pair tried to break the horizontal resistance with an aggressive upswing but eventually failed, which resulted in a long wick on the H4 candle and a very strong pullback. This movement told us that inducing an upswing may be a real struggle and that the chances of that happening have decreased significantly. Another problem arose on Friday when a shooting star was formed on the green resistance. This proved too much for the bulls, who subsequently gave up completely. Obviously, the movement was coordinated with other pairs too, as EUR was declining on nearly every single chart.

EURGBP H4

 

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

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