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I spy with my one good eye this upside triangle break on EUR/GBP! Will it make a pullback to the broken resistance or all the way down to the .8800 support?

Long EUR/GBP Idea

In my Weekly Watch earlier this week, I was just waiting for a test of the triangle resistance on this pair. But lo and behold, a breakout already took place!

I didn’t rush to hop in a long position, though, since I figured price would still try to retest the broken resistance before heading further north. The ceiling around the .9000 major psychological handle held, allowing price to retrace from its climb.

I’m waiting for a slightly deeper pullback to the 61.8% Fib, which is close to the .8900 handle and lines up with a mid-range area of interest. Stochastic is already indicating oversold conditions, but I’ll also wait for the oscillator to turn higher before jumping in.

EUR/GBP 4-hour Forex Chart
EUR/GBP 4-hour Forex Chart

If euro bears aren’t quite done with their retracement yet, the pair could even dip to the longer-term support around the triangle bottom and .8800 handle, so I’ll set my stop below that level.

Strong growth figures from the euro zone, supported by consistent improvements in medium-tier data, have kept me euro bullish. The ECB is scheduled to start its taper soon, after all, and it’ll just be a matter of time before rate hikes follow.

Although the BOE has actually hiked interest rates already, I’m not too confident about the U.K. economy, which is showing signs of slowing down as consumers are reeling from the surge in price levels. There’s also the Brexit to worry about and not to mention the persistent troubles within PM May’s government.

Here’s my plan:

Long EUR/GBP at .8875, stop loss at .8725, profit target at .9275

This should give me a potential 2.67-to-1 R:R and I’m risking 0.5% of my account on this setup. What do you guys think?

 

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