Downside is now 'in play' for EURGBP
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.
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.
- 0.7980, being a multi-week Symmetrical Triangle projection, and
- 0.7865, being a Fibonacci 61.8% retracement of the prior bull market advance from 0.6935 - 0.9365 (see weekly chart below).
Entry: Today: EURGBP is seen as a Sell at market and more so on any bounce