With main financial occasions in February from each the U.Okay. and Euro zone, we’ve acquired a stable technical setup to take a look at that might result in a swing or longer-term play on EUR/GBP.
EUR/GBP: Each day
Yesterday, my pal Niko identified a really stable chart setup on EUR/GBP, so I made a decision to dig slightly bit deeper into the pair for a possible commerce thought.
As we will see on the each day foreign exchange chart above, the pair has been in a stable downtrend since September of final yr with clear swing tops and bottoms alongside the best way.
After a spike larger final week, the market is on its means again to the falling ‘highs’ sample, which coincides with the most recent Fibonacci retracement ranges and an overbought sign from the stochastic indicator.
We will additionally see that the candlesticks simply fashioned an Night star (a bearish triple candlestick sample), and as we’ve seen within the latest previous, bearish candlestick patterns have preceded turns decrease in value. That raises the chances of this week’s sample drawing in technical bears as soon as once more.
Fundamentals & Catalysts
Essentially, it’s possible been the divergence in financial coverage strikes/hypothesis that’s fueled the downtrend in EUR/GBP. The Financial institution of England has been in price hike mode (hiked final week to 0.50%), whereas the European Central Financial institution holds off on price hikes. The ECB additionally continues to view the present excessive inflation surroundings as transitory.
And whereas it appears just like the ECB is beginning to heat as much as price hike potentialities currently, odds are that it’ll be a really lengthy whereas earlier than we see rate of interest tightening within the Euro zone, particularly if financial information and sentiment continues slowing forward.
And talking of what’s coming forward, we do have a number of main catalysts in February that might affect the following directional transfer for EUR/GBP. Most notably, a U.Okay. GDP replace this week, then U.Okay. CPI information subsequent week, and eventually, Euro zone / U.Okay. enterprise sentiment information close to the tip of the month.
Total, if the information continues to level to excessive inflation within the U.Okay. whereas European enterprise sentiment information slows, then this bearish technical setup could have legs to proceed the development decrease.
For longer-term or swing merchants, be on the look out for these occasions and construction trades accordingly (i.e., modify your place dimension as market information and value motion verify/invalidate your lengthy or quick thesis).
However what do y’all assume? Is that this the swing high for EUR/GBP and can it return to the downtrend? Or will the falling ‘highs’ sample break? Please tell us in our remark part beneath!
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