Medium term
Trade view / 09 August 2016 at 7:26 GMT

EURGBP rally highlights DeMark exhaustion count

Analyst / PIA First
United Kingdom

We have barrage of second-tier UK data at 0830 GMT followed by the NIESR UK GDP estimate at 1400 GMT.  Although there is no clear indication of a change in trend for EURGBP as yet, there are warning signs of a potential turn and we look to sell a break of support today. 

Here is what the charts are saying: 

Weekly – Posted a bullish five wave formation (Elliott wave). That now dictates that we should see a choppy three wave correction lower. It should also be noted that for the last three weeks (and this week up to now) we are posting inside soldiers (bars). This is a clear indication that the move higher lacks strength. As long as 0.8577 is not breached we will see four inside weeks in succession. 


Source: Saxo Bank. Create your own charts with SaxoTraderGO click here to learn more

Demark posts a 13 exhaustion count this week. This often indicates a change of trend

Daily – We are in a corrective channel formation. This is seen as the BC leg in the first corrective AB=CD leg lower. 
 Source: Saxo Bank

Our bespoke support is not seen until 0.8196. Using a measured move tool (AB=CD) would suggest that a top should be in place close to 0.8570. Channel top is seen at 0.8578. We also have a 78.6% pullback level at 0.8544. 

Option one – Selling close to 0.8570 with a stop above the trend channel would offer good risk/reward targeting 0.8200.

Option two – Our preferred trade is confirmation of a change of trend. This would be selling as break of 0.8510. It should be noted that there is solid support at 0.8480 today so we could see a corrective bounce there. 

Management and risk description


Entry: Selling a break of 0.8510

Stop: 0.8560

Target: 0.8200

Time horizon: 2 weeks (estimate)

— Edited by Clare MacCarthy

Non-independent investment research disclaimer applies. Read more


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