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EUR/GBP has been on a pretty sick run higher in the last three months, but it looks like the bulls are slipping recently. Opportunity to play the trend or is it time for Sterling to take the lead?

EUR/GBP Rally Pullback or Reversal?

EUR/GBP 4-Hour
EUR/GBP 4-Hour

Ever since rumors of unease in the European Central Bank on the strengthening euro came out at the end of August, the euro has pulled back across the majors.  This could be an opportunity to jump on the uptrend, and with the ECB meeting coming up this week, this could be a setup for some quick short-term pips.

Right now, the pair seems to be stabilizing ahead of the meeting, and also traders are unlikely to put on fresh risk or add to current positions with tensions high between the U.S. and North Korea. But we will likely get volatility during the ECB meeting, and if that volatility brings euro pairs like EUR/GBP down, I’m looking to buy some euros because I do think the market is pretty sure we’ll get a reduction in easy money policies from the ECB before the end of the year; the data has been too good for them to not taper.

And of course, on the Sterling side, the data has been good but Brexit is always an “X” factor. Right now, significant challenges remain, most notably a wide difference between where the EU and UK stand on the Brexit “divorce bill.” Because of these challenges, I still remain neutral on Sterling despite inflation data being good enough for calls for  an interest rate hike from the Bank of England. 

So, no orders today but I will be on the lookout for a retest of a previous area of interest around .9050 – .9100 on the four hour chart above, which is also the 50% – 61% Fibonacci retracement area of the latest swing move higher. If tested and buying support shows up, AND the ECB doesn’t give the market any strong concerns that may keep’em from tapering, I’ll throw some orders up quickly or maybe even go in at market.

We’ll have to wait and see and until then, remember to never risk more than 1% of a trading account on any single trade. Adjust position sizes accordingly. Create your own ideas and don’t simply follow what I do.

Pipcrawler’s Q2 2017 Blog Trading Performance

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