Tag: EURGBP

Despite breaking to new highs now at 0.8724, momentum is still unable to match the new highs in price with new highs on the RSI. The $EURGBP moved lower off the highs last week but found support at the 50% Fibonacci level at 0.8486. With price moving lower off the new highs, the $EURGBP is biased to move lower as the new trading week gets underway. Despite the close above the key 0.8500-psychological level, the $EURGBP remains biased to the downside to start the new trading week. If the $EURGBP is unable to move above the 0.8600-resistance level, then it can be expected to move to new lows. A Friday close below the 0.8500-support level may invalidate the current bullish bias in the short-term and supports a deeper correction of the summer rally.

The European Central Bank (ECB) Governor Mario Draghi has made it clear that the path for future monetary policy action is further easing and accommodation. This dovish bias includes cutting interest rates again, as soon as September. However, contrary to these euro fundamentals, markets continue to buy euro. It is likely that September will be no different. In fact, the euro may accelerate its rally higher if the ECB fails to deliver this highly anticipated move to further accommodate monetary policy. The economic calendar is very busy out of the Eurozone this week. A slew of PMI data from the core European economies are due for release this week. The event risk of the week for the euro is the release of the German jobs data. As the strongest economy in the Eurozone, a weak jobs report may accelerate $EURGBP weakness.

OUTLOOK FOR THE WEEK: After breaking back below the channel last week, the $EURGBP has been unable to move higher. The trendline of the channel has acted as resistance capping the rally out of the Fibonacci buy zone on the weekly chart. Sellers step in on rallies back to the trendline… [subscribe]

This was our look at the EUR/GBP at the beginning of the week, ahead of the ECB:

The recent consolidation in the EUR/GBP was signaled by the bearish divergence at the highs. Now, the end of this move lower is being signaled by a bullish divergence at the lows on the RSI of the daily chart. The EUR/GBP starts the new trading week bouncing along the bottom of the buy zone. Buyers continue to keep price bid as momentum builds despite being in bearish territory. Though not a true bullish divergence because price is not at new lows on the daily chart, it is noted that momentum is no longer making new lows despite the new lows to 0.7564. This may be a nascent signal of bullish price action in this new trading week. Furthermore, after the move to 0.7564, the subsequent higher lows coinciding with building momentum on the RSI give the EUR/GBP a bullish bias. Despite the recently bearish price action, the EUR/GBP targets a move to the upside in the new trading week. A continuation of the rally is confirmed on a close above the key 0.7700 level.

Premium trade setups with targets and stops are published in the EUR/GBP Outlook for the Week in Volume 64, this week’s Quid Report.

The $EURGBP has made new highs to 0.8117 after a four-month rally. Though this month could mark a fifth month, the rally might have finally reached a point of exhaustion. There is a very similar example of price action during the very beginnings of the financial crisis in 2007. A sharp move to the upside found resistance at 0.8100 and corrected as low as the 0.7700-support level. The next six months were spent rangebound in the zone between 0.7940 and 0.7860. This support zone also held up price action in 2014. During its descent in 2014, the $EURGBP loosely found support between the 0.7940 level and the 0.7860 level. Day-to-day price action was very choppy at that time too. There is good reason to believe this trend may see the start of consolidation last week. That might have been the end of consolidation too. Price has managed to find support at the 0.7940-support level, which is also the top of the support zone. While the move to new highs broke above the 0.8100-resistance level, the $EURGBP has already consolidated 38.2% of the last bullish wave of the rally. As a Fibonacci move on the $EURGBP, this is very bullish price action and signals a resumption of the rally in the new trading week.

Premium trade setups with targets and stops are published in the EUR/GBP Outlook for the Week in Volume 59, this week’s Quid Report.

This time last year, the euro was selling off as the European Central Bank (ECB) made no change to monetary policy in the midst of the Greek banking and debt crisis. Twelve months later in December, the ECB finally eased monetary policy and cut the deposit rate. Since then, interest rates in the Eurozone have steadily drifted further into negative territory. But the EUR/GBP has since bottomed with a tremendous rally that finally broke above the major 0.7500 resistance level. However, with the ECB signaling a lower path for interest rates, the EUR/GBP is consolidating through price with a bearish divergence in momentum. After reaching the 0.7897 highs, price fell back to the former 0.7755 highs. During consolidation, the EUR/GBP found support at the 50% Fibonacci level, which enjoys confluence with the 0.7700 support level.

Another Friday close below the 0.7755 highs confirms the exhaustion evident for a couple weeks now in the $EURGBP rally. With a light calendar next week, this leaves the EUR/GBP at the whim of the chart technicals. A break below 0.7700 sees a move back to former lows. Otherwise, a breakout higher now targets the 0.7897 highs.

Premium trade setups with targets and stops are published in the EUR/GBP Outlook in Volume 50, this week’s Quid Report.