EURGBP Descending Triangle: A 250 Pips Trading Opportunity

EURGBP has been consolidating in a descending triangle pattern for the last 92 days, with the price fluctuating between the upper and lower boundaries of the pattern. As technical traders and analysts, we can use this pattern to identify potential trading opportunities. In this article, we will analyze the pattern and provide insights on how to trade it to maximize profit potential.

Descending Triangle Pattern

The descending triangle pattern is a bearish pattern that is formed by drawing a horizontal line at the pattern’s low and connecting a series of lower highs with a downward-sloping trendline. The pattern indicates that sellers are gradually gaining control over buyers, and a breakdown is expected. In the case of EURGBP, the pattern’s lower boundary is at 0.87, which has been tested multiple times. Traders should closely monitor the price action around this level as a break below it could trigger a sharp sell-off.

Price Action Analysis

In the last few months, EURGBP has been moving in a range-bound manner, with the price creating lower highs and testing the horizontal support at 0.87 multiple times. On Feb 03, 2023, the pair hit its highest level at 0.895 but quickly reversed to form a lower high at 0.89 on March 07, 2023. Since then, the price has been moving within the descending triangle pattern, with a recent attempt to break above the pattern’s upper boundary. However, the bulls failed to sustain the momentum, and the price formed a bearish pin bar, indicating a potential reversal to the downside.

Trading Opportunities

Based on the descending triangle pattern and price action analysis, we can identify potential trading opportunities. If the price breaks below the horizontal support level of 0.87, it could trigger a sharp sell-off, providing a shorting opportunity for traders. Traders should wait for the daily bar to close below 0.87 before initiating a short position. The 200 EMA also lies around the same level, providing additional confluence to the bearish bias. The target for the short position is 250 pips, based on the pattern’s height.

On the other hand, if the price manages to break above the pattern’s upper boundary and close above the recent local high of 0.884, it could trigger a long position, with a potential target of 250 pips to the upside.

EURGBP – how to trade this descending triangle (click the image)

Risk Management

As with any trading strategy, risk management is crucial. Traders should place a stop loss order above the pattern’s upper boundary for short positions and below the pattern’s lower boundary for long positions. This will limit the potential losses in case of a trend reversal.

Conclusion

EURGBP has been consolidating in a descending triangle pattern for the last 92 days, providing potential trading opportunities for technical traders. The pattern’s lower boundary at 0.87 is a crucial level to watch, and a break below it could trigger a sharp sell-off, providing a shorting opportunity for traders. On the other hand, a break above the pattern’s upper boundary at 0.884 could trigger a long position. Traders should use risk management techniques and closely monitor the price action to maximize profit potential.