The “breach” of the 50% Fib on the above weekly chart had no mojo at all turning into a mere price probe. The 0.8813 level provided strong resistance as price made a high of only 0.8816 and has now staged a deep pullback from that high. We’ve seen strong resistance at these Fibonacci levels before from the EUR/GBP so this price action should have been expected behavior.
That bullish chart pattern on the hourly chart also held. I was fooled by the false breakout below the rectangle’s bottom at 0.8700 to 0.8686. If it had been a sustained break below there would have been a confirmation close below the bottom of the rectangle. But price immediately regained the whole number and went on to rally to a high so far at 0.8816 in the next 2 trading sessions.
Now during the Asia session, the EUR/GBP has already staged a whopping 100% retracement of yesterday’s rally with a low on the day already of 0.8764. Though price is finding support at this level, we need to be aware of what this level of retracement means and that is a reversal of the intraday uptrend.
I am staying away from this pair at the moment. EU rumors in regards to soverign debt is really affecting the euro. Also, news from the UK is due out in a couple hours (IP and BoE inflation report). I’ll be watching the 0.8813 level. If price finds resistance again at 0.8813, I will look for price to reverse from there. On the other hand, a break of this level targets former-support-turned-resistance at 0.8954.
Trade what you see folks, not what I think.
