EURGBP has been trading lower from the last couple of weeks as economic data from the UK encouraged the GBP buyers. However, I think EURGBP may form a short to medium term bottom soon, and can rise again. So, we would be looking to buy EURGBP, and wait for the pair to gain some ground.
Looking at the 4 hour chart, there is a wedge forming as plotted on the chart below. There are a couple of ways to trade EURGBP. First, if the pair breaks to the upside and closes above the wedge and the immediate resistance at around 0.8430/40, then we would enter a buy trade with a bullish candle pattern and divergence on the 1 hour chart.
Secondly, if the pair drops further, then we would be looking for the pair to make a stop at any of the support levels at around 0.8320 and 0.8280 as plotted on the daily chart shown below. We will enter a buy trade when the pair stops at any of these levels and creates a divergence on the daily and 4 hour chart. Our initial target would be the gap close at around 08520, and final target could be next resistance at around 0.8580. Stop should be below last low in the first case, and below 0.8260 for the second case.
Furthermore, if you look at the weekly chart, 0.8280 is the 50% retracement level of the last major Bull Run. So, this particular level is very important in order to maintain our bullish bias on the pair.
Reviewing yesterday’s events and trades
There was a surprise fall in the US initial jobless claims released yesterday. Initial reaction to the data was very US dollar positive. However, all the dollar gains were washed away when the market came to know that those gains were due to computer upgrades in two states. EURUSD traded as low as 1.3255, but quickly recovered to 1.3320. NZDUSD and AUDUSD are still range bound and waiting for any spark to cause a breakout.
Fundamental Outlook for the day
Today is the last trading day of the week, and we have US retail sales data and Michigan Consumer sentiment scheduled later in the US session. If the data does not disappoint, then I expect US dollar to retrace some of its losses going into the weekend. So, do not chase any weird move friends.
This analysis is taken from today’s Daily Market Forecast, which also includes trade opportunities on: GBPCHF, EURAUD, NZDUSD, AUDUSD, USDCAD, NZDJPY, GOLD, SILVER, DOW JONES and S&P500.
Get it HERE: Vladimir’s Markets Forecast
Happy weekend friends. Enjoy!
