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Tag: EURGBP

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Is There Any Correlation

Forex traders love to compare the cross currency pairs to the major currency pairs. Even those of us who are firmly in the camp that you trade each chart in and of itself, also like to conspire every now and again. The $GBPUSD has been moving higher all year, closing last week again above 1.70. The $EURGBP, however, closed back above 0.80 after already retracing 38.2% last week. Up until this week, sterling had been trading with good strength in both pairs. Two weeks ago, both $GBPUSD and $EURGBP closed above/below their respective big fig levels. Was Friday’s divergent close a signal of a decline in sterling?

GBPUSD versus EURGBP
$GBPUSD in candles, $EURGBP orange line of close price

Looking at this $GBPUSD vs. $EURGBP comparison chart, we see that these pairs tend to move inversely to each other especially during bouts of GBP strength. This rally of the last several months is no exception. With $GBPUSD already poised at the beginnings of another leg higher, the close above previous its highs is really bullish. If we see new highs in cable this week, we should see $EURGBP move towards the lows again despite the close above 0.80. Likewise, if we see new lows in $GBPUSD on a hold of 1.7050 resistance, perhaps $EURGBP confirms the Friday close and does shoot higher. Mind the calendar and trade what you see.

 

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EUR/GBP On Trend

I really like this break in 0.8130 today. Last week, it was support on that break of former weekly lows at 0.8160. Because $EURGBP is good to produce fakeouts, it was the 0.8130 level that would validate and confirm a true break to new lows.

EURGBP 4 HOUR CHART

So I was long last week and we can see several spike rallies on the above 4-hour chart. But when Friday’s price action languished below 0.8160, I became convinced that the $EURGBP remained on trend and I changed my stance.

Despite lower prices in housing, the core CPI number released today hit the BoE’s “eyebrow raise” level of 2%. A 2% CORE CPI will have the BoE watching inflation closely this summer. If this number trends upward, Carney will have to readjust his rate raise timeline just stated recently in the Inflation Report last week. That could be very bullish for sterling and substantiate these new midterm lows.

 

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The Week Ahead In Charts

Last week, Janet Yellen changed the game. This supposed uber-dove fooled us. She came out hawkish without really rattling markets. She is reigning in the USD. Contrary to those that say she’ll retract later, markets may come to find out that Yellen is serious. She is much more hawkish than the market ever expected. Can the USD strengthen on this change?

GBP/USD

$GBPUSD declined last week to 1.65 even breaking below the big psychological level on the back of Yellen’s hawkish rhetoric last week. The technical picture looks broken as cable closed the week below 1.65 for the 1st time since January. Price breaks the 61.8% Fibonacci level at 1.6467. It looks like another failed breakout on the weekly chart. Just when cable had everyone yelling for 1.70 (even yours truly), markets once again make a sucker out of everyone. If $GBPUSD is unable to find support above 1.6500, this would signal a reversal back to 1.6250. Is the Yellen spark enough to break that level? That’s the more interesting price action for market sentiment. And the Yellen FOMC just became the 1st central banks to raise interest rates AND remove QE.

GBPUSD WEEKLY CHART

EUR/GBP

The $EURGBP has managed to stage a rally higher than expected finding resistance right at the 0.8400 level. Price now remains trapped in a range between 0.8330 and 0.8400. However, it seems that the EUR will find difficulty rallying in the face of weak economic data and a still dovish ECB. If price breaks below 0.8330, losses could accelerate back to the 0.8250. But it remains to be seen how much EUR can really rally on its own fundamentals. This may be the only currency that sterling can rally against. If 0.8250 holds then we’ll be back to these levels again with resistance at 0.8400.

EURGBP WEEKLY CHART

GBP/CAD

Canadian data continues to support a weak CAD which only continues to support the $GBPCAD at its 2014 highs. However, this pair is having a difficult time breaking any higher above 1.8650. Price continues to pivot around 1.8500. The fundamentals in this pair continue to favor the bulls. But can it really rally when GBP is weak in all the other pairs. I’m not so sure.

 GBPCAD DAILY CHART

GBP/NZD

There has been a major breakdown in the $GBPNZD causing a reversal on the daily chart. During the consolidation of the $GBPUSD, the $GBPNZD was holding up quite well in its own consolidation. But the effects of the Ukraine-Russia conflict have sparked a rally in commodities and with it the NZD. As such, the correction that was taking place in the $GBPNZD and finding support at 1.9500 broke down further last week. Price managed to completely reverse this year’s rally moving to back to lows on the daily chart. The level to watch is 1.9100. A break below  moves prices toward 1.9000 with major support at 1.8850. However, if price finds support at 1.9100 then it moves back to 1.9500. Watch out also for intervention from the RBNZ if the NZD continues to find strength.

GBPNZD WEEKLY CHART

GBP/AUD

The $GBPAUD is benefiting even more from the rally in commodities even as the Chinese economy, Australia’s biggest trading partner, continues to slow. There is also a massive head and shoulders chart pattern on the daily chart that many traders are looking to resolve to even lower levels. Based on this chart pattern, price could decline to 1.7600 which is the huge 61.8% Fibonacci retracement level on the weekly chart. Even a 400-pip decline from current levels wouldn’t change the bullish bias on the long term chart. But will the RBA allow the AUD to strengthen that much? RBA intervention is a real possibility if $GBPAUD breaks this support at 1.8000.

GBPAUD WEEKLY CHART

GBP/JPY

Despite the bull trend on the daily chart, $GBPJPY has fallen below the big psychological level at 170.00. Even while the pair is finding support at 167.50, a break below 167.30 signals a price move to 163.80/164.00 support. Only a close back above 170.00 can change this new bearish sentiment in the $GBPJPY. A move lower will be choppy as the bull trend no doubt still has many buyers  with the $GBPJPY still only in a shallow retracement.

GBPJPY WEEKLY CHART

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Sterling Digest – crosses firm up

Yesterday, $GBPUSD fell to new lows just pips ahead of the 50% Fibonacci level at 1.6536. It was the move many of us had been waiting on for weeks. Now that the consolidation in $GBPUSD is finally over, I believe we will see GBP resume its rally in many of the major pairs. The UK fundamentals have been there and the strong recovery is its reality.

GBPUSD vs EURGBP comparison on 4hr chart

However, what is interesting is the reversal that is beginning to confirm itself in the comm doll pairs. I expected these pairs would weaken to key support levels. However, this week, for the 1st time in months, those support levels are being broken. We may be on the cusp of D-Day where swing buyers start to sell and bail out of the market. OR. It could be an incredible buy opportunity because of the BoE minutes and FOMC announcements this week.

  • The BoE minutes are out and they are hawkish. (eFXnews)
  • I saw it too but it never counts unless you publish. These guys were 1st to show this incredible H&S in $GBPAUD. HUGE level. (Twitter, Factor)
  • The $GBPNZD put in a huge level too. While I thought 1.95 was key, 1.9150 proved to more significant. (Twitter, FMFX)
  • Raising interest rates vs. tapering QE — interesting take (Telegraph)
  • The huge bounce off support in the $GBPCAD this week very nicely reflects a dovish Bank of Canada and overall weakness in Canada versus a hawkish Bank of England and robust UK. (Ashraf Laidi)
  • A review of the $GBPUSD move we have been waiting on all month (FMFX)

 

 

 

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The Week Ahead In Charts

GBP/USD

No real change in the last 2 weeks as cable remains rangebound during its consolidation. Price action reminds me of the price action back in October when price finally broke above 1.60. Cable consolidated in a range between 1.61 and 1.59 for that entire month. It wasn’t until price broke down to the then 50% Fibonacci retracement level at 1.5850 that price resumed its monster breakout to new highs above 1.63. I believe that is same price action we have now and price will not resume higher above 1.6820 until we see price fall to 1.6550/00.

GBPUSD DAILY CHART

EUR/GBP

The $EURGBP has finally broken higher above 0.8300 and has moved right into the resistance level at 0.8330. Between here and 0.8350 is a potential sell zone for a move back to the lows at 0.8160. If $EURGBP buyers are to gain anymore traction, there must be a daily close above 0.8350 to signal a sustained move higher to 0.8400.

EURGBP DAILY CHART

GBP/CAD

As Canadian fundamentals continue to deteriorate (Friday’s jobs report showed Canada lost jobs last month), the $GBPCAD will remain bid even as sterling continues to consolidate. The major psychological level at 1.85 remains a level where traders see major positioning for when GBP strength returns. The $GBPCAD has found staunch resistance at 1.86 but still targets 1.90 midterm.

GBPCAD 4-HOUR CHART

GBP/NZD

I’d imagine there is some serious positioning going on in the $GBPNZD right now too. This pair actually had some real movement falling over 350 pips in the past 2 weeks. Price sits at the bottom of this consolidation range as the week opens. It’s a light week out of the UK but the Reserve Bank of New Zealand could surprise markets. Likely more jawboning but geopolitics have changed quite a bit with this Ukraine-Russia situation and commodity prices have firmed. 1.95 is key support into the rate decision.

GBPNZD DAILY CHART

GBP/JPY

The Bank of Japan is set to deliver a monetary policy announcement this week too. The $GBPJPY opens the week at the 172.00 former highs after moving off the new highs at 173.55. A correction lower sees support at 171.50. However, $GBPJPY remains bullish above 170.00.

GBPJPY DAILY CHART

 Compare:

The Week Ahead In Charts (FMFX)

 

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The Week Ahead In Charts

After a week of consolidation in sterling, GBP pairs are a mixed bag as this new trading week gets underway.

GBP/USD

Though $GBPUSD has moved off its recent multi-year highs, it has been a volatile and choppy ride lower. Expect more of the same again this week, as this pair continues to correct lower towards 1.6500. I believe big time buyers are set up all around 1.65 between the 50% and 61.8% Fibonacci retracement levels. A move from these levels supports a rally to 1.7000 mid term.

GBPUSD DAILY CHART

EUR/GBP

The $EURGBP spent all last week struggling at the 0.8250 level. On Friday, however, price broke above 0.8250 and held the level to close the week. While the daily chart is in a clear downtrend, price is holding support at the weekly chart’s 61.8% Fibonacci retracement level. This correction has the potential this week to continue higher to the zone between 0.8330 and 0.8350. From here, it will be decision time. But the odds are with the bears as GBP could catch another bid and push price back to lows.

EURGBP DAILY CHART

 

GBP/CAD

While $GBPUSD and $EURGBP consolidate, the $GBPCAD price action has remained bullish . Candaian fundamentals keep the $GBPCAD well supported on dips. Dips due to GBP weakness have been bought below 1.8500 as CAD fundamentals continued to deteriorate. For some reason the Canadian economy is falling into recession even as the US, its largest trading partner, has remained robust. This pair will continue to have issues getting higher as long as cable is weak. Once $GBPUSD starts to show strength again, the $GBPCAD should find conviction higher again.

GBPCAD DAILY CHART

GBP/NZD

The $GBPNZD has remained very bullish closing the week above the almighty 2.00 level. As the $GBPUSD continues its consolidation lower, there is major positioning occurring at this major psychological level in $GBPNZD. It has been a whipsaw at the highs but as long as the overall GBP bull trend remains in place, this pair is poised for 2.05 mid term.

GBPNZD DAILY CHART

 

GBP/JPY

The $GBPJPY has remain elevated as equity markets bounced higher to the 2014 resistance levels. This week, all eyes on US stocks and emerging markets as 2 wars ended this weekend. The stage is set for risk to rally higher as geopolitical events turn towards peaceful resolution. As $GBPJPY opens this week above 170.00, the bullish sentiment favors buyers even as the trend still remains corrective below 175.00.

GBPJPY DAILY CHART

All these charts suffice it to say that sterling is smoking hot. A trend that can correct is only headed higher. And a trend that holds up during consolidation has the makings for a major breakout. $GBPUSD is the pair to guague timing in the GBP crosses during this time of consolidation. Once major levels are reached in cable, sterling may rock out across the board once again. Or not. Price will ultimately tell.

Disclosure: I am long $EURGBP as of this writing since last week.

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Sterling Digest, 13 February 2014: phase two

Mark Carney, Governor of Bank of England
The honeymoon is over

Bank of England Governor Mark Carney delivered the long awaited Inflation Report after “scrapping” forward guidance just a month ago. What Carney gave is what some are dubbing stronger guidance. He recognized and upgraded the UK economic recover and then added more indicators to produce “Forward Guidance – Phase 2”. Whatever you want to call it, the markets liked it and sterling rallied hard across the board. The rally continued even during the Asian session as those traders got the opportunity to digest the Inflation Report and Carney’s remarks. Now with sterling at key resistance levels, does it have the strength to go higher? What’s even more interesting to watch is if sterling can continue to rally in the face of a dovish BoE.

Image credit

 

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Is This Euro Rally For Real

It surprising to see the euro’s positive reaction to Draghi’s oration. There are pundits that like to speak about President Obama but he has nothing on our resident ECB Governor, Mario Draghi. After leaving monetary policy on hold, Draghi reiterated low interest rates and hinted at a cut or QE depending on data. And yet, the euro rallies. With an approving nod toward low inflation benefits on wages and recent positive economic developments, Draghi gave this budding euro rally some fresh legs to stand on.

EURGBP weekly chart

The weekly chart is a clear downtrend but this 61.8% Fibonacci retracement level has turned out to be a big deal right now. It was hard to get long earlier this week knowing how dovish the ECB is. But today’s positive reaction, really fits the technical outlook for a rally to 0.8600. A Friday close above 0.8300 would be very bullish also. Near term targets to contend with for any type of material trend reversal to occur lay at 0.8350, 0.8400 and 0.8500.

Listen to more $EURGBP analysis here.

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Sterling Digest, 15 January 2014: WTF

TIME magazine cover of new Fed chairman Janet Yellen
Until her 1st meeting in March, USD may hijack the markets with uncertainty

These 1st 7 trading days have been a nightmare for me with sterling. SHEESH! The market pushed to highs and lows and yet still remains rangebound. The volatility, too, has been intense as players jostle for position in the year open. Nobody wants to miss the monster rally of 2013. Both bears and bulls have been shook out and made money. It hurts but there still a lot of new year left. It is important to admit to the pain, analyze mistakes and make the next decision. Timing has needed to be perfect and fearless. Yet this is always easier said than done. A $GBPNZD short at 2.00 was a beautiful opportunity but the volatility on NFP day shook me and faked me right out of the trade. Other traders have been sharing similar frustrations in the market. Thankfully, there are others still who are seeing very clearly and their shares have been a guiding light to (some) clarity. That is the beauty of the market…and the stream.

 

(Image credit)

 

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