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Political troubles in Italy have been haunting the euro these days while sterling has resurfacing Brexit issues to contend with. Think this downtrend could carry on, though?

Short EUR/GBP Idea

In my Weekly Watch, I’ve shared a potential channel resistance setup on this pair, and it looks like the ceiling is holding like a boss.

A small double top reversal pattern even formed after the test of the channel top, with price starting to break below the neckline. This could lead to a slide all the way down to the channel bottom around the .8600-.8550 levels.

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

Stochastic is already indicating oversold conditions, though, so buyers could return from here and attempt another test of the channel top. After all, the mid-channel area of interest could contain some buy orders that could spur a quick bounce.

Both these European currencies are down in the dumps, with the euro weighed down by political troubles in Italy and the pound facing the usual slew of Brexit concerns. Between the two, though, I’m a tad more bullish on sterling because the BOE is closer to hiking rates compared to the ECB.

I haven’t set any short orders yet, but I’m looking to jump in on a break of the mid-channel area of interest around .8700 or on another test of the channel top at .8800.

Depending on where I’m able to enter, I plan on setting a 100-pip stop and aiming for the bottom of the channel. Of course I do hope I’m able to catch a move back to the top for better R:R, but it’s up to Mr. Market! What do you guys think?

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