EUR/GBP Update – Wedge Suggests more Sell-Off to Come

3 min read
HubertM

HubertM

Author

Dear Traders,

The EUR/GBP has provided some more confirmation of the bearish scenario we highlighted in the previous analysis of this pair.

Today’s analysis will give an update on the latest price structure, what to expect next, and new potential trade setups.

Expanding Wedge Could Set the Stage for more Downside

Price has confirmed bearish momentum since our last analysis and produced a significant drop yesterday. But so far it appears to be moving downwards via 3-wave structures since the Feb 14 high, (as opposed to a series of 5-wave impulses). This strongly points towards the scenario of an expanding leading diagonal (expanding wedge) as wave 1 of a new bearish trend (refer to white lines of the 4 hour chart above).

The 1-hour chart below shows the 3-wave moves, since the last major high, in more detail.

A strong break below 0.8790 would most likely invalidate the wedge scenario and suggest that price will continue to move down swiftly without much hesitation.

Trade Setups

In our view, the next good trade setup would be to sell at the start of the projected Wave 5 of the expanding wedge. Here is what we are looking for:

  1. A bullish bounce should occur soon (at the time of this writing)
  2. A 3-wave move upwards has to form. Watch out for the price zone around 0.8855 – 0.8870, which is the 61.8% and 78.6% Fib area of Wave 3.
  3. A bearish bounce in this zone could be a good sell signal.
  4. Price must not go beyond Wave 2 (0.8888) for the wedge scenario to remain valid

 

All the best along your trading Journey

Hubert

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