EURGBP Technical Analysis
This is a fairly tough decision as we are able to enter both EURUSD and EURGBP. Entering both trades will result in a relatively high exposure to EUR as are currently holding a long trade in EURJPY.
As we explained in EURJPY trade alert ECB Nowotny threats of a QE expansion by the European Central Bank (ECB) was meant to devalue the Euro as we will be surprised if the ECB does act ahead of the general elections in Spain that are scheduled to take place in December. Our assumption is that many currency strategists made note of the reversed Head-And-Shoulders (H&S) in EURUSD weekly chart. If the neckline is breached it may affirm a medium to long-term trend in Euro Dollar. The verbal intervention forced EURUSD to retrace lower, off the reversed H&S neckline.
We are unable to locate a firm technical entry in Euro Dollar. While Euro yen is supported by our projections for a QE expansion by the BOJ there is very little fundamental data that supports EURUSD uptrend. EURGBP on the other hand is technically supported. On rare occasions we do take trades without the support of the charts but this is not one of those cases.
EURGBP Daily Chart
Please click on the chart to enlarge:
EURGBP us approaching it daily support at 0.7330 while the rising 44 Daily Moving Average (DMA) may prevent any heavy selling in the pair. The daily close was above yesterday’s close, which leaves the possibility for a potential uptrend open. The target would be resistance (in black) while the protective stop is layered beneath the 44MA.
EURGBP Trade Alert Details
Entry: long at market price (0.7351)
Take profit: 0.7498
Protective stop: 0.7274
Risk Ratio RR): 1 : 2.2 (approx.)
Estimated duration: 14 days
23/10/15 UPDATE: Although the trade was in a light profit of approximately +20 pips, the trade suffered from the UK retail sales on Thursday and the ECB press conference. Although the QE was not expanded, Mario Draghi hinted the deposit rate could be lowered, which triggered a mass EUR selling in the Forex market, triggering the protective stop loss order for the long trade.
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