EUR/GBP hits our watchlist for a potential play ahead of the latest ECB meeting. Will the event spark a big move to break the pair’s tight range?
EUR/GBP Support Break?
On the four hour chart above of EUR/GBP, we can see that the bears have been in firm control after a late February bounce, bringing the market back to its longer-term trend lower since the beginning of 2021.
But over the last session, the market has traded in a roughly 40 pips range (less than its daily ATR of around 50 pips). This suggests traders are sitting on the sidelines, likely waiting for the upcoming ECB’s monetary policy meeting, which could likely bring a big burst of volatility to the euro.
Expectations are for the ECB to hold off on new policy moves, but traders will be watching out for any potential action by the ECB to counter the rapid rise in bond yields over the past few weeks.
If you’re looking to just play a fast rise in volatility, consider a straddle setup, a basic entry strategy typically used when trading the news. Of course, you’ll have to play attention to the actual catalyst, in this case the ECB’s stance on bond yields, to decide whether or not the reaction could be a legit breakout or a fakeout.
For those looking to play the trend lower, of course consider a break below the support area around 0.8550 as a sell signal, which may likely draw in technical sellers, or even fundamental traders if the ECB‘s rhetoric downplays the rising bond yield story.
If the ECB does mention potential action to limit the rise in bond yields, the euro could actually bounce in that scenario, making a break above the falling trendline a scenario to watch for a potential short-term long position. Again, the longer-term trend is lower so upside moves may be limited without a change to Sterling’s recent bullish bias.
What do you all think? Are you watching EUR/GBP for a potential trading the news setup? Let me know in the comments section below!
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