The recent weakness in the pound brought about by no-deal Brexit concerns has pushed EURGBP to its 5-week highs at 0.8590. As for the sterling euro exchange rate, it has dropped to 1.1656.
Will the Falling Trend Line on the Daily Chart Hold?
The daily time frame presents an opportunity for a sell trade. EURGBP is currently testing resistance on the falling trend line when you connect the lower highs of August 12 and October 9. The exchange rate is currently trading just below the 0.8600 psychological handle. This price also seems to coincide with the 38.2% Fib level when you draw from the high of October 9 to the low of December 13. A reversal candle around this price like a shooting star could confirm that there are sellers in the market. EURGBP could soon trade to its December lows around 0.8275.
EURGBP Pulls Back to the 38.2% Fib Level on the Hourly Time Frame?
On the other hand, the hourly time frame of EURGBP presents a setup for a potential buy trade. For one, when you connect the higher lows of December 16, December 20, and December 23, a rising trend line becomes apparent. When you draw the Fibonacci retracement tool from the low of December 20 to the high of December 23, you will see that the 38.2% Fib level coincides with the trend line. This price, which is around 0.8550, also aligns with the currency pair’s previous highs.
Bullish candles around this level could mean that EURGBP may soon make its way to its 5-week highs. Who knows, if the pound weakens even more, we could see EURGBP close higher and make its way to 0.8770 where the 100 SMA and 200 SMA coincide on the daily time frame.