Short term
Trade view / 18 July 2016 at 2:56 GMT

EURGBP: Sterling may be all sold out

Managing Director / Technical Research Limited
New Zealand

The 10-year German bund yield has moved back into positive territory (just) suggesting markets aren’t expecting any further easing by the European Central Bank when issues a policy review statement on Thursday.

But last week’s flash estimate of inflation in June showed the ECB will need to keep the peddle to the floor for many months yet.

In contrast, market pricing suggests a high probability the Bank of England Monetary Policy Committee will vote to cut the bank rate by 25 basis points on August 4 to coincide with its quarterly inflation report which will include updated economic forecasts.

There are a couple of MPC members out on the speaking circuit this week and we may get a better feel for which of “a range of possible stimulus measures” the BOE is leaning towards.

On the data front, UK retail sales numbers will be of interest on Thursday but perhaps a better guide to post-Brexit sentiment will be Markit’s special PMI survey on Friday.

Management and risk description

Having been the weakest of the major currencies for quite some time, Sterling may now prove the strongest “hold-out” against a stronger US Dollar, for a while.

From an Elliott Wave perspective, it is tenable to interpret a completed 5-wave sequence from EURGBP’s July 2015 low of .6930 to its July 2016 high of .8625 (refer daily chart below).

This would then leave EURGBP vulnerable to a significant corrective retracement. eg. a Fibonacci 38.2% retracement would yield a sell-off toward the .7980 level, whilst a 61.8% retracement would extend toward .7580.

Furthermore, from a classical charting stand point, there is a potential developing 3-week Head and Shoulders pattern (see daily chart) with a sustained break below Neckline support (currently situated about .8250) yielding a downside projection toward the .7880 level.


Entry: Any break of 0.8250 today/tomorrow presents a selling opportunity.

0.8308, initially. 

50% at 0.8028.

Time horizon:
Allow several weeks.

EURGBP daily chart (click to expand)
EURGBP daily chart
EURGBP weekly chart (click to expand)
Source, both charts: ThomsonReuters  

— Edited by Adam Courtenay

For more on forex click here        

Non-independent investment research disclaimer applies. Read more
18 July
Charles Asmar Charles Asmar
Good morning Max, Thank you for your help and the parameters! Any advise for GBPUSD, NZDUSD? Appreciate your help and concern, Cordially, Charles


The Saxo Bank Group entities each provide execution-only service and access to permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on or as a result of the use of the Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. When trading through your contracting Saxo Bank Group entity will be the counterparty to any trading entered into by you. does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of ourtrading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws. Please read our disclaimers:
- Notification on Non-Independent Invetment Research
- Full disclaimer

Check your inbox for a mail from us to fully activate your profile. No mail? Have us re-send your verification mail