I’m looking at this textbook uptrend forex play on EUR/GBP this week, but I swear I’ll be extra patient in waiting for the U.K. top-tier reports first. As I’ve shown y’all in my Forex Weekly Watch, a correction is already taking place for this pair and I’m watching the 61.8% Fib in particular because it lines up with the bottom WATR and PWL.
To top it off, I’m also seeing a bullish divergence, as price made higher lows while stochastic showed lower lows. I haven’t set any entry orders yet but I’ve got my one eye locked on the .7650-.7700 buy area.
For today, the U.K. is set to print its CPI readings, with the headline figure slated to rise from 0.2% to 0.3% and the core figure projected to dip from 1.4% to 1.3%. Weaker than expected results could convince me to enter at market and aim for the previous highs near .7900 for a short-term trade.
Even though both the ECB and BOE are in the dovish camp, I’m more bearish on the pound since U.K. central bank officials are still in the middle of shifting to a less upbeat stance. Just yesterday, formerly hawkish MPC member Ian McCafferty started talking about negative interest rates as a possible policy option for the BOE, as he changed his inflation assessment for the economy.
ECB Governor Draghi also dropped his usual share of dovish vibes in saying that policymakers will reconsider adjusting their QE program in March, but it looks like forex participants have priced this in a long while back.
I’m looking to go long around .7650-.7700 if the U.K. CPI readings come in below expectations, but I’ll be ready to close early if the jobs and retail sales figures due later on in the week come out strong. In the meantime, make sure you read our risk disclosure and follow me on my social media accounts if you’re hoping to join me on this forex setup.