EUR/GBP Technical Analysis: Support Trend Line is Breached

Tuesday, 05 April 2011 18:05

The EUR/GBP finally showed signs of weakness after UK’s services PMI boosted the pound during Tuesday’s London session. Here is an updated technical outlook.

The trend line (T1) was broken clearly, so was the 0.8754 (S1) support. The down move opens up the way for a quick short trade.

The next support level (0.8663) coincides with the 38.2% Fibonacci retracement of this year’s up move, which seems perfect for a first target profit.

Waiting for a retracement near S1 or even back to the trend line would decrease our risk/reward ratio and make for an even better trade.

Should the price reach our target profit, we could wait for another retracement and get back in with the hope that the price hits the 50% or 61.2% levels

However, as usual, we must keep track of the market events and should not hesitate to withdraw any open position if the fundamental outlook changes.