Trade view /
04 August 2016 at 8:08 GMT
A big day for the GBP with the rate decision and minutes seen at 1100 GMT. EURGBP charts would suggest that we are in for a relief rally in GBP and here is why:
The monthly chart clearly highlights the cross breaking out from the downward trending corrective channel. The impulsive move up from the 2015 lows would suggests that the bias will remain bullish over the long-term. 0.8125 has been pivotal and, being close to the reverse trend line support, is our first support barrier.
Longterm GBP chart (click to enlarge):
Source: Saxo Bank. Create your own charts with Saxo Trader click here to learn more
However, it is not until we place a trend channel on the current price action that highlights a possible right shoulder of a bullish reverse head and shoulders lining up at 0.7500.
This is our second medium-term support. This more aggressive correction to the downside will hopefully come clear in lower timeframes.
The weekly chart highlights a bullish Elliott wave-five count now complete. This would suggest that we are now in the corrective formation lower (AB=CD correction).
Expect trading to be mixed and volatile.
Using a Fibonacci retracement tool, we can see that the 61.8% pullback level comes in at 0.7577, close to the aforementioned support at 0.7500.
Daily chart - A bearish Outside Bar on Tuesday would also suggest that the CD leg (of a more complex and volatile sequence) is now underway. AB=CD would take us to 0.8106. We have bespoke support at 0.8162 and will be our first target over the short term.
So to reiterate, we are temporary bears in EURGBP. The 0.8165-25 target area should be seen over the next two weeks with a possible corrective move down towards 0.7600 before year-end when we expect that upward bias to re-emerge.
Management and risk description
Entry: selling a break of 0.8340.
Target: 0.8165 .
Time horizon: within 10 trading days.
— Edited by Clemens Bomsdorf
Non-independent investment research disclaimer applies. Read more