After a multi-year run higher, the euro/pound foreign-exchange pair topped out in October and has been trending lower since.
In the daily chart below, there are two areas that we refer to as event areas or those where a major price move originated that formed as this market changed direction. Notice that this market recently experienced a vacuum back up to test these areas and sold off from there in the wake of British Prime Minister Theresa May's speech outlining her plans for Britain's exit from the European Union.
There are two factors that support our bearish bias below the 0.8850 resistance area. There is an obvious strong resistance area at the previously mentioned event areas that are containing the market and an approximate 50% retrace of the initial swing lower, both of which are seen below.
For sellers, it all depends on the line in the sand at 0.8850. If the price is below that containment level, expect the market to trade lower.
We are looking to be sellers on any pockets of strength, and we would hold short positions until a strong break or close back above 0.8850. Our downside target is down near 0.8340 initially, possibly lower if the bears remain in control.