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Trading Opportunities of 2016: If a Base is in, EURGBP Could be a Juicy Short Squeeze

Trading Opportunities of 2016: If a Base is in, EURGBP Could be a Juicy Short Squeeze

Tyler Yell, CMT, Currency Strategist



Validating Level: Break Above 0.7496

Invalidation: Close Below 0.6980/20 Support

Target: ~0.7870 2015 High Price

The December 3, 2015, move in EURUSD was amazing at 463 pips and nearly matching pip for pip the March 18 move when Janet Yellen of the Fed first signaled that the Fed would wait longer than previously expected to raise rates. The effect of that news event on EURUSD in mid-March was akin to a large beach ball that was held under water being let go, only to see the ball break through the surface. +460 pips in a day on a G10 currency is like that. However, EURGBP had a similar result with the only difference being that the very strong move higher (in favor of the EUR) happened off what could be a long-term triple bottom.

When looking at the long-term chart, it appears that the current and expected bad news in EUR is pricedin, and the market has nearly finished moving lower. If we get a move through the 0.7469/1 (trendline from August 2013), we could be working our way higher to reverse some of the losses since late December 2008. While the move off the March low has been choppy, it appears the scope to extend toward 80, if not higher is in place. The termination of a trend should be validated with a strong break of support or resistance before the riskis taken. However, if a base has formed, it would appear the low in July is a level we can be aggressively bullish against and look for targets higher when trading. The bullish view of EUR/GBP in 2016 wouldbe validated on a daily close above 0.7469.

See the next Top Trade Opportunities in 2016: Finding Potential Trading Opportunities in EURGBP

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