EUR/GBP Struggles at Resistance Following Bounce on ‘Brexit’ Fears
- EURGBP trading near resistance in two forms
- Looking for lower prices in short-term, but not expecting a strong trend
- EU Referendum news-flow should keep GBP moving in both directions
EUR/GBP has experienced strong moves in both directions lately with ‘Brexit/Bremain’ news-flow pushing sterling around. The cross is currently trading around resistance between roughly 7750 and 7780. A ‘head-and-shoulders’ pattern triggered on 5/18, but since then we have seen a push back towards a retest of the ‘neck-line’. Not far above this resistance level lies an upper parallel running lower off the 4/7 peak (‘head’).
With uncertainty regarding the EU referendum dominating sentiment, price movement in both directions in GBP should find opposition. If that is to continue being the case, then there should be opportunity on both sides of the tape.
The trend lower off the April high in conjunction with a still functioning H&S top suggests selling resistance right in the current vicinity offers up good risk/reward for seeing another decline back towards the recent lows under 7600. The measured move target for the H&S top is lower (~7360), but given the current environment we will be happy to take a trade back towards the recent lows. Risk/reward on the trade is ~1:2+ depending on entry point.
If EUR/GBP breaks cleanly above 7800 then risk becomes skewed upward towards the May congestion period between 7865 and 7945.
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Today, we have some event risk with US NFPs coming up at 8:30 EST/12:30 GMT time. Analyst are looking for 160k on the NFP print and a downtick in the unemployment rate to 4.9% from 5%. Signs of wage inflation via the average hourly earnings will be in scope as well. No estimate available, prior was 2.5% YoY. The labor participation rate was previously 62.8%.
Entry: Between 7735 and 7780
Target: Sub-7600 depending on momentum
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---Written by Paul Robinson, Market Analyst
You can follow Paul on Twitter at @PaulRobinsonFX, and/or email him directly at email@example.com
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.