Theresa May’s surprise call for a snap election had Sterling hopping today, bringing this simple technical setup on EUR/GBP to the edge of going live.
EUR/GBP Trade Idea
In this week’s Weekly Watchlist, I posted about how EUR/GBP was setting up for a potential triangle breakout. It looks like those rising lows have finally broken thanks to a strong catalyst from the U.K. as British PM Theresa May, who surprised the market with a call for an early U.K. General Election (originally scheduled for 2020) in hopes to increase support around her and improve her odds of getting the best Brexit deal she can for the U.K.
By Sterling’s reaction to the news, this is viewed as a positive, possibly because it reduces the probability that Brexit is going to be a hot mess, or at the very least, the U.K. can leave the European Union with a decent deal. Whatever the case may be, the next question is whether or not this downside break has legs or is it just another buying opportunity for the bulls?
Of course, no one knows, but I’m willing to take a shot on a short position as I’m more of a fundamental bull on Sterling than euro, the interest rate differential favors Sterling, and if there is a downside break, the potential return-on-risk is very, very attractive with the 2015 lows as a potential max target.
But I’m not jumping in just yet until I see another daily close or two below that strong support area right at the minor psychological level of .8350. If that happens, I’ll post up my entry and exit levels, as well as any adjustment plans.
Until then, trade safe and as always, don’t risk more than 1% of your account on a single trade and make sure you read our risk disclosure if you’re thinking of taking the same setups.
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