The Daily chart in EURGBP is faltering at resistance. At the same time the RSI is testing triangle support on the 4 hour chart. This might be useful for swing traders positioning for a possible move lower.
EURGBP CFD Daily Chart
There are several things about the daily chart in this FX pair that might provide a clue that a pullback is on the cards
- Price has stopped near the 38.2% Fibonacci retracement level after a steep rally. It's pretty common for upward corrections to initially fall away from this price and move back towards the recent low. Ultimately the correction might move higher but 38.2% can often see the end of the end of the first leg in a corrective rally
- Price is also testing the 55 day moving average, and, together with the 38.2% retracement, this forms a possible resistance cluster around this level
- The slow stochastic is well into the overbought zone (see arrow)
Bearish RSI Triangle
With the 4 hour chart threatening to break below a steep trend line, the RSI might be useful as tool to provide extra confirmation that the trend is breaking down.
I've shown a 14 period RSI on the 4 hour chart. The trend line across recent peaks in the RSI is showing divergence with price (making lower highs while price continues to make higher highs). However, there is also a relatively flat trend line across the RSI supports. This makes the whole thing look like a bearish descending triangle.
One approach to basing an entry strategy around the RSI would be to sell if it breaks below support. Because the RSI is calculated on the last or closing price of a candle , a common approach is to sell on the first close where the RSI is below its triangle support.