EURGBP
Updated
Since January we’ve seen a gentle downtrend in the EURGBP (red channel), which has seen an acceleration in pace since the end of April (blue channel). We are now at the lower limits of the prevailing channel but with room to fall further with our next major support being around the 0.8575 area which coincides with our blue channel support.
Fundamentally, the two are very similar; granted Germany have recently posted negative gdp growth but the uk is hardly a bastion of economic growth. Both have stubbornly high inflation but show signs of gradual effectiveness of monetary policy. For me personally, I feel that 0.8550 - 0.8750 is a fair exchange rate for this pair and suspect that they will become range bound between these points over the coming weeks and months. Absent key fundamental changes of course.
My are of interest is between now and 0.8550 and will continue to scale in as the price moves lower.
Trade safe!
Fundamentally, the two are very similar; granted Germany have recently posted negative gdp growth but the uk is hardly a bastion of economic growth. Both have stubbornly high inflation but show signs of gradual effectiveness of monetary policy. For me personally, I feel that 0.8550 - 0.8750 is a fair exchange rate for this pair and suspect that they will become range bound between these points over the coming weeks and months. Absent key fundamental changes of course.
My are of interest is between now and 0.8550 and will continue to scale in as the price moves lower.
Trade safe!
Note
Position update. Trade 1 open at 0.8615
Trade 2 open 0.8584
Note
Trade 3 open at 0.8569Trade active
Trade active
Trade active
Note
This Chart pattern formation suggests further weakness may be on the short term horizon but a break of a descending wedge is usually considered to be a bullish reversal. Add to this the weak to moderate divergences that are slowly forming and we may very well see a show of strength in the euro. Short term fundamentals are bullish for sterling but high rate hike expectations are already priced in and any deviation may hit the pound hard. My next entry cautious entry will be if price entered the green zone. Trade safe
Note
We’re now at a key area (circled) of resistance. We’ve had a bullish tweezer on the 4hr and daily which is generally a good reversal pattern. If the price closes around the highs then we’ll also have an engulfing candle on the daily. Both of these are good bullish indicators; but we need a break of this resistance before any further gains can be expected.
Due to the news releases this week I’m inclined to move all stops to B/E. I’d rather be safe than sorry.
Note
Potential rejection of structure?
Place longs with caution. Especially given the recent bump in UK wage growth which will undoubtedly add further heat to the inflation figures.
Trade active
Note
the delta has made a new low whilst the price has stayed flat. This is indicative of market absorption.. lots of selling but somebody is happy to accept all of those sell orders which is supporting the price. If this continues we may see a pullback.
Note
No surprises but a very opaque and carefully worded press statement on forward guidance. With no admittance to a rate pause will we see a rise in this pair?Note
Trade 4 opened at 0.8522Note
Ending the week on a high note… I wish! ;p
The weekly shows resistance coming up around the psychological 0.8500 and some moderate divergences starting to form on the 4h.
Will the unrelenting strength of the pound yield to common sense or will it continue to rocket? At this point I’m not too sure but I suspect nothing of note will happen between now and the uk inflation data due out next week.
Hope you all have a good weekend… back to it on Monday!
Note
My next POI is the grey zone indicated on the chart
Note
Finally, all trades hit their tp which was moved to 0.8631.Total profit - 234pips
Note
This recent move has touched an 8 year trend line which has been respected several times going back to 2015. Will it hold up this time? Note
Is this the formation of a new channel? If it is, the price is due a rise to upper limits around 0.8660-80 area.
Although the yields for the gb02 have increased, the German 02 has also increased, fixing the spread between the two at 2% which will hopefully stabilise the pair for a move to the upside in the coming weeks.
Personally, I struggle to see how the uk economy can withstand the interest rates required to tame inflation. I guess we shall see.
Have a good weekend!
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.