The EURGBP is recovering from its sell-off which took price action briefly below its support area, visible in light blue in the above H1 chart, and is now trading inside of this area. The Bollinger Band indicator confirms the change from bearish to bullish as the lower band and the middle band are sloping upwards while the upper band is trending sideways. In addition the Bollinger Band has enclosed its support area from where a short-covering rally can develop.
Forex traders may decide to realize floating trading profits as the downside potential remains limited from current level while there is plenty of room for a rally to advance the EURGBP. This currency pair is trading between the lower band and the middle band of its Bollinger Band indicator and a breakout above the middle band could take this currency pair above its support area and initiate the expected short-covering rally.
In order to profit from the short-covering rally forex traders are recommended to enter long positions in the EURGBP at 0.7165 and below which will position their forex portfolios in the right direction. Conservative traders should wait for a breakout above the middle band of its Bollinger Band indicator. A take profit target of 0.7250 has been set for a potential trading profit of 85 pips on the H1 Chart. More buy orders are expected once the EURGBP breaks out above its support area.
Forex traders should protect this trade with a stop loss level at 0.7130 for a potential trading loss of 35 pips which will result in a Risk-Reward (RR) ratio of 2.43.
Long @ 0.7165
TP @ 0.7250
SL @ 0.7130