Short term
Trade view / 19 April 2017 at 1:21 GMT

Downside is now 'in play' for EURGBP

Managing Director / Technical Research Limited
New Zealand
Instrument: EURGBP
Price target: 0.7886
Market price: 0.8355

GBP traders got caught short when Prime Minister Teresa May announced a June 8 election, sparking a strong rally in GBPUSD.

The Conservative party has long had a big lead over the opposition in polls, so the prospect of the Tories remaining in power of itself would not account for the extent of the rally. There may be some short covering yet to be completed, but new information will be required to extend the move much further in the short term. EURUSD went along for the ride with sterling – in part – and a weaker US dollar also helped.

Today we will get a second estimate of Eurozone inflation for the year ended March, but little change to the earlier flash is expected. Any upward revision at all to the annual core rate of 0.7% would be a positive for the euro.
In the UK Friday’s retail sales number is the only major data release due out this week.

Management and risk description

EURGBP has now completed its complex nine-month Head & Shoulders reversal formation (which I have been highlighting over past weeks) to yield a downside objective of 0.7380.

Before this “lofty” objective is reached, other chart and mathematical targets along the way are:
  1. 0.7980, being a multi-week Symmetrical Triangle projection, and
  2. 0.7865, being a Fibonacci 61.8% retracement of the prior bull market advance from 0.6935 - 0.9365 (see weekly chart below).
Key chart resistance now lies at 0.8400/.08460 (refer daily chart below).


Entry: Today: EURGBP is seen as a Sell at market and more so on any bounce
toward the late 0.8300s.

Stop: Above 0.8460, initially.

Target: 50% at 0.7995 and 50% at 0.7886.

Time horizon: Allow at least several days for targets to be met.

 Daily EURGBP chart (click to expand)
EURGBP  Daily Chart
Source: ThomsonReuters. Create your own charts with SaxoTrader; click here to learn more. 

Weekly EURGBP chart (click to expand)
EURGBP weekly chart
Source: ThomsonReuters 

— Edited by Robert Ryan

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FBT431 FBT431
Treve Treve
Insightful Analysis, you've been "onto" this for quite awhile Max! Great work.
Patto Patto
I think it's "Theresa" May - to be precise. She is calling the election to outflank the hard-Brexit members of her own caucus. She needs 50 or so new moderates to join them. Should be no problem: no one has had such a poll lead (20%) ahead of an election since Thatcher in 1983 and she scored a landslide..


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