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EURGBP: Pending Short - Downtrend Intact

EURGBP: Pending Short - Downtrend Intact

Nick Cawley, Strategist

EURGBP – Pending Short at 0.8774.

Stop Loss at 0.8843.

Target 1 (50%) at 0.8690.

Target 2 (50%) at 0.8621.

The DailyFX Q4 EUR and GBP Forecasts are available to download.

EURGBP – Lower Highs and Lower Lows Dominate the Chart

When considering this trade set-up, it’s is important to keep in mind that Brexit headlines can, and will, shift the value of Sterling sharply and so the trade is risky and may be prone to volatile moves. While there has been a slight positive turn in Brexit sentiment, nothing is yet agreed with the EU, while PM May also faces increasing pressure from within her own party over the exact nature of any deal. The Euro is also under pressure as the economy continues to slow down – German Q3 GDP on Wednesday is forecast to turn negative – ahead of the end of the QE (bond buying program) in December.

From a technical stance, EURGBP remains pointed towards the downside. Since the August 28 high of 0.9098, the pair has fallen to a recent low of 0.8690 and in the process has made an unbroken series of lower highs and lower lows. EURGBP also trades below all three moving averages and will find initial upside resistance at the 50% Fibonacci retracement level at 0.8803. A stop will be placed at 0.8843, just above all three DMAs and at the bottom of the October 31 candle.

The initial target – 50% of the trade – is set at 0.8690, the November 8 low with the second target all the way back to the April 17 range low at 0.8621. The entry price at 0.8774 - currently above the market level of 0.8736 – gives us some flexibility and takes into account the current low level of the RSI indicator at 40.25.

EURGBP Daily Price Chart (March – November 12, 2018)

EURGBP: Pending Short - Downtrend Intact

IG Client Sentiment Datashow that retail investors are 57.5% net-long EURGBP and coupled with recent changes – traders are further net-long on a daily and weekly basis - this gives us a stronger bearish contrarian bias.

Traders may be interested in two of our trading guides – Traits of Successful Traders and Top Trading Lessons – while technical analysts are likely to be interested in our latest Elliott Wave Guide.

What is your view on EURGBP – bullish or bearish?? You can let us know via the form at the end of this piece or you can contact the author at nicholas.cawley@ig.comor via Twitter @nickcawley1.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.