The EUR vs GBP ended its steep sell-off inside of its support area which is marked in light blue in the above H4 chart. The sell-off originated from its resistance area visible in light grey and this currency pair is now set to enter a short-covering rally as forex traders are likely to realize floating trading profits as the sell-ff appears exhausted. Existing short positions will be closed and once the EURGBP trades above the support area more buy orders are possible.
The Bollinger Band indicator confirmed the strong sell-off and the upper band acted as a solid resistance level to any bounce higher. Now the Bollinger Band is trending sideways at its support area as the EURGBP is trading between the middle band and the upper band of this indicator. The lower band did break down below the support area, but has since recovered and is now trading inside of it as is the middle band; the upper band is trading above the support area.
Forex traders are recommended to enter long positions at 0.7015 and below this level in order to take advantage from the expected short-covering rally. Conservative forex traders should wait for a breakout above the upper band of it Bollinger Band indicator before entering their long positions. A take profit target of 0.7330 has been set for a potential trading profit of 315 pips on the H4 Chart. More buy orders are expected after the EUR completes its breakout above the support area.
Forex traders should protect this trade with a stop loss level at 0.6975 for a potential trading loss of 40 pips which will result in a Risk-Reward (RR) ratio of 7.88.
Long @ 0.7015
TP @ 0.7330
SL @ 0.6975
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