The EUR/GBP rang in the new year with a new low, breaking down a multi-month consolidation structure. After the break however, we got a quick pullback, so let’s take a look at this breakout, and the markets attempt to test whether this breakout will extend or become a false breakout.
After a rebound from 0.7750, EUR/GBP started this week with a range roughly between 0.78 and 0.7850. A break above 0.7850 continues the bullish correction but only in the short-term and within the context of a bearish breakout. If the bearish breakout is to remain in play, price should not close back above 0.79-0.7920 area. If it does, then we have a false breakout, and there would be pressure to the upside.
However, if price falls below 0.7790, then we are likely in bearish continuation, with pressure on the 0.7750 lows, and the risk of falling toward the 0.7690-0.77 area, which represent the lows during a long period of consolidation in 2008.
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