That EURGBP Again

by Ashraf Laidi
Mar 8, 2011 14:59 | 14 Comments

That EURGBP Again - EURGBP Weekl Mar 7 (Chart 1)

EURGBP broke above the Oct 2010 trendline resistance of 0.86, now facing the next key obstacle at the 100-week MA of 0.8660s last broken since Nov 2010. The pattern of lower-highs remains intact as two major trendlines continue to hold: (i) March 2010 trendine (red) and (ii) Dec 2008 trendline (black), both suggest subsequent pressure point near 0.8770-80s. Positive stochastics on the weekly chart appear to support further upside towards testing the 100-week MA of 0.8660s until the more important barrier of whether 0.8770-80s.

FUNDAMENTALLY, EURGBP is supported in the near-term, especially if the Bank of England makes no surprise and holds rates unchanged. The decision would disappoint some of those who may expect a rate hike as early as this month after the unexpected addition of one more hawkish dissent at last months MPC (Dale joining Weale and Sentence). While leaving rates on hold this week may mean a negative knee-jerk reaction for GBP and a short term bounce in EURGBP towards 0.8700s, it does NOT alter markets pricing of rate hikes at the April and/or May meetings. Upon those expectations, GBP will likely preserve some foundation, hence prevent EURGBP from breaking out i.e. closing above 0.88, which would be deemed as the ultimate break of the major trendline resistance (red).

Also FUNDAMENTALLY--on the EURO side of the story, is the lingering issue of peripheral debt. The latest downgrades of Spain and Ireland were shrugged off, but the possibility of a Portuguese bailout is back up as 10-year bond yields stand above 7% for the 23rd straight day, which is well above the 17-day duration that triggered the bailout of Greece and Ireland. All of these are potential negative dynamics for EUR, which validate the 0.88 resistance, a level, above which EURGBP could consider stops for intermediate targets at 0.85 & 0.8380s.

 

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Comments (Showing latest 10 of 14) View All Comments
mckinnovation
Dublin, Ireland
Posts: 49
9 years ago
Apr 21, 2011 12:01
Thanks Ashraf. Your yesterday's $eurgbp tweet gave me a trade idea. Here it is as I am streaming it live through twitter :) >>http://tradersisland.blogspot.com/2011/04/current-trade-live-sold-eurgbp-08873.html <<

and it worked out pretty well. I don;t normally trade this pair but I have good spread with CMC :).

Rgds,

@RiskVReward

www.twitter.com/RiskVReward

DaveO
N.Cornwall, UK
Posts: 5733
9 years ago
Apr 1, 2011 12:50
eurgbp continues to react at fib target levels and then reverses back up to make new highs. Kissed the 161.8% level yesterday (8844). Next upside level test of 8942 high. Trend support 8730 as of today candle.
Rob
New York , United States
Posted Anonymously
9 years ago
Mar 31, 2011 2:50
Thanks Ashraf - I actually decided to stay in the EUR/GBP short, I'm +20pips - seems like the weekly trendline is the key support to this pair - 0.8750 - and obviously ECB's rate decision is key.
I'll keep an eye the other EUR pairs you mentioned - looks like the double-tops are on the weekly charts - thanks! And best of luck with the new Premium FX Service! All of your followers have been waiting for this day.
Ashraf Laidi
London, UK
Posts: 0
9 years ago
Mar 29, 2011 0:30
Rob, keep aneye on that emerging double tio in many of the euro pairs. EURUSD and EURCAD. We might see more downside in EURAUD if todays charft doenst look like a doji. Theres more downside in dailychart but thas more likely to be in the form of falling EUR then rising AUD.

Ashraf
Rob
New York, United States
Posts: 305
9 years ago
Mar 28, 2011 23:39
Thanks - I went short at 0.88 so Ill bail on this pain-free. Much appreciated!
Ashraf Laidi
London, UK
Posts: 0
9 years ago
Mar 28, 2011 23:27
ROb, This has turned totally the other way. From 1st look at latest dailies, i'd say 0.8830s is surely viable but not sure if enough momentum to break 08930s in which case would make break the cycle of lower highs since Jan 2009.

Ashraf
Rob
New York, United States
Posts: 305
9 years ago
Mar 28, 2011 23:19
Closed above 0.88 today - any thoughts anyone? Thanks
Rob
New York, United States
Posts: 305
9 years ago
Mar 28, 2011 18:57
Has the 0.88 resistance just turned into support? Anyone get in on this pair?
Ashraf Laidi
London, UK
Posts: 0
9 years ago
Mar 21, 2011 15:58
Heres the latest;

EURGBP breaks above its 100-week MA of 0.8660, and is now nearing the 0.8770 barrier alerted in the latest HotChart Daily stochastics and RSI point to BEARISH DIVERGENCE.

Tomorrows UK Feb CPI could strengthen expectations of a BoE rate hike and drag down EURGBP in the event that the 4.2% print does materialize. With UK inflation twice as much as that of the Eurozone, the case for a BoE tightening remains stronger. But all of these are details impacting the short term dynamics of EURGBP.

More negative US data (-9.6% decline in existing home sales) will not help the case for removing QE2. Silver and Gold attempting to regain their Mar 7 highs. Long term picture
remains favourable for silver relative to gold and the 38.50-70 stands as the next short term target. The metal is expected to regain its $49 high before end of this summer.


Ashraf
DaveO
N.Cornwall, UK
Posts: 5733
9 years ago
Mar 21, 2011 15:49
I suspect eurgbp may well have topped out, any short play could have stop at 8765