It’s time to consider one of the most interesting currency pairs of the foreign exchange market, which is the euro/pound. Even though today is the last day of February and weekly trading, I will start the review with the weekly timeframe, where there is a rather curious situation.
After a long strengthening of the British pound against the single European currency, we see that the situation is changing dramatically at the auction of the current five-day period. So, after falling to the area of a strong technical mark of 0.8540, the pair gained support and began to recover the losses incurred before. At the time of writing this article, a bullish candle with a long lower shadow is forming on the weekly chart, which can be fully considered a reversal. Now the euro/pound is trading slightly above the important level of 0.8700. If the week ends above this mark, and even more so above the orange 200 exponential moving average, then the idea that the pair is turning up will find its confirmation. In this case, the growth may continue to the price zone of 0.8800-0.8817, where the broken support level, as well as the red line of the Ichimoku Tenkan indicator, pass. However, we should not rush to conclusions yet, and perceive the current rise in the exchange rate as a correction to the previous decline. But the bears’ task now looks much more difficult. To continue the downward trend, a true breakout of the support at 0.8542 is necessary and consolidation below this mark and the iconic psychological level of 0.8500. Only if these conditions are met will the road to lower prices open up.
The daily chart also shows a reversal signal, which is a circled candle for February 24. As you can see, after its appearance, the pair turned in the north direction and showed a fairly confident growth at yesterday’s trading, closing Thursday’s session above the red line of the Tenkan Ichimoku indicator. Today’s trading, at the time of writing, is again dictated by the bulls, however, the strong resistance that does not allow the pair to go higher is the blue Kijun line. The chart clearly shows what kind of rebound occurs from this line. The task of the players to increase will be to close today’s trades above Kijun. If they fail to do this, and a bearish candlestick pattern appears on the daily chart, further adjustment of EUR/GBP will be in question.
For today, I recommend taking a closer look at the purchases of the pair after its decline in the price zone of 0.8690-0.8665. If such a decline takes place and signals for an upward reversal appear in the specified area on the four-hour and (or) hourly charts, it is worth trying to buy, but with small goals, within 30-40 points. Updating the current today’s highs at 0.8730 can also be used to open long positions, but this is for those traders who use a breakout trading strategy. In my opinion, the adjustment is not yet complete, so it is better to refrain from selling and wait for the completion of the pair’s correction. After the corresponding signal appears, we will consider opening deals for sale.
The material has been provided by InstaForex Company – www.instaforex.com
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