EUR/GBP broke above major resistance and sellers couldn’t take it back lower. With the global risk-off environment still the current driver, I had to let this one go. Here’s a quick forex trade review.
Original Trade Idea: Forex Trade Idea: EUR/GBP Resistance to Hold?
In my original trade idea, I shorted at the top of the 2015 range on EUR/GBP in case it would draw in sellers, possibly on the U.K.’s relative strength to the euro zone and on monetary policy divergence. Well, after breaking and pulling in minor resistance around .7550, buyers would come in to buy on every slight pullback, pretty much letting me know that resistance isn’t going to hold. And with the current global sentiment in risk aversion mode, that favors the euro more than Sterling, so it’s likely that buyers of EUR/GBP will continue to stay in control for now. With those thoughts and price holding above the resistance area, I decided to close the trade down manually today at .7550 for a very, very small loss.
Total: -105 pips/ -0.26% loss
Overall, I think this is the right move, especially ahead of the upcoming Bank of England monetary policy meeting. Even though the actually event is not usually a market mover, and since there are usually no changes, with recent data and sentiment on the U.K. weaker, I don’t like the odds in favor of the British pound. So, I’m staying away from Sterling long for now, and it’s a great thing that I already have a short position now with my GBP/NZD short. Besides that, I’m looking at yen pairs again to play the risk aversion sentiment. Stay tuned!