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I can’t help but check out this really neat tech setup on EUR/GBP as the pair is showing a textbook break-and-retest play. But do fundies line up?

Long EUR/GBP Idea

This pair has formed higher lows and higher highs, enough to create an ascending channel on its 4-hour time frame. Price just bounced off the top and may be due for a test of support around the .8800 mark soon.

Applying the Fib retracement tool on the latest rally shows that the 61.8% level coincides with the channel bottom and a former resistance level, which might also hold as a floor.

A steeper rising trend line can also be drawn to connect the lows since last month, and this support zone coincides with the 38.2% Fib and mid-channel area of interest. At the same time, stochastic is indicating overbought conditions, with a bullish divergence to boot!

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

I’m guessing you can tell that I’m feeling very tempted to jump in a long position right now, but I’m gonna remind myself to stay patient and sit on my hands until the ECB decision is over.

Although the latest update on the Trump-Juncker trade truce is bullish for the shared currency, I can’t help but be wary of another round of cautious remarks from ECB head Draghi during their statement presser. With that, the pair could still dip to the actual channel bottom before getting back on its feet.

As for sterling, I’m sticking to my bearish bias because of Brexit uncertainties. PM May is attempting to present a solid front ahead of EU negotiations by taking full personal control of talks, but I highly doubt the big boys in Brussels would cave to U.K. demands easily.

While the BOE is also eyeing a potential rate hike soon, Guv’nah Carney did warn that a likely “no deal” Brexit decision could prompt policymakers to rethink their tightening plans.

I’m gonna wait and see how the ECB decision turns out first before setting entry orders, but my plan is to go long around the .8815 region and aim for the top of the channel near .8900 for my target. I’ll set my stop just below the channel support to keep a good R:R on this setup. Stay tuned!

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