Pound Tumbles as Economic and Fiscal Confidence Falter
Looking back over the headlines of the last 36 hours, there has been virtually no news or economic release to discourage confidence on the British pound. In contrast, the data behind the euro has deteriorated dramatically and the situation with Greece seems to be passing the point of no return. Naturally, this would suggest that the euro would be tumbling while the pound is relatively stationary; but this is certainly not the case. In fact, the regional currency is relatively anchored on the day, while the sterling has plunged. This is an unusual set of circumstances that perhaps falls back on dated beliefs that the UK perhaps as bad as it was six months ago; and the Euro Zone is more stable. I think this is a false notion and the market fundamentals will work themselves soon. Of course, it doesn't pay to bet against the market until there is a sign that market itself is ready to change its mind.
From my positions this morning, I have booked a loss and profit. After EURGBP broke above the 200-day SMA at 0.8835 and held there on an intrday basis, I decided to cut out for a 50 point loss. However, this was more than offset by the 200 points that I was able to make after taking off half my GBPUSD position this morning. I still like GBPUSD short and will keep the remaining half of that position on with a trailing stop. Looking across the market for other pound-based pair setups; many of the crosses are either set in the momentum of breakouts or are in the middle of ranges. I am somewhat interested in GBPCHF coming to the floor of a wedge formation (with the rising trendline that defines support dating back to January 2009) around 1.6425. However, it is best to wait and see what price action looks like when we get to that level rather than just setting a blind entry order.
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