It looks like pound bears are back in the game with Brexit talks going on and BOE Governor Carney sounding less upbeat. Think I should hop in this bounce?
Long EUR/GBP Idea
In my Weekly FX Crosses blog posts, I keep highlighting this rising channel and area of interest on EUR/GBP but I’ve been hesitant to go long at market or set buy orders.
For one, the BOE decision turned out to be surprisingly hawkish last week when a couple of other policymakers joined Kristin Forbes in voting for a hike. I thought the channel support was going to break!
However, buyers soon returned as the focus returned to Brexit-related uncertainties. Negotiations have already kicked off this week and market watchers have been keeping extra close tabs on the headlines to gauge if the U.K. government can walk out with a good deal or not.More pound sellers joined the fold earlier today when BOE head honcho Carney threw cold water on rate hike expectations. He clarified that he’s still seeing mixed signals when it comes to consumer spending and business investment, not to mention subdued inflationary pressures.
And with SNB Chairman Jordan jawboning the franc and basically dulling its safe-haven shine, the euro was left as the most viable risk-off beneficiary in the European market. Keep in mind that the ECB sounded less dovish in their latest policy decision, so the shared currency also has some points in its favor.
Looking ahead, the U.K. still has the Queen’s Speech to contend with and I expect this to inject a few reassuring vibes for the economy. With that, I’m keeping my one good eye peeled for another quick test of the channel support around the .8775-.8800 area before going long.
Here’s my plan:
Long EUR/GBP at .8775, stop loss at .8675, profit target at .8875 for a simple 1:1 setup.
I haven’t set any buy orders yet since I plan on watching how price action unfolds in reaction to any headlines in the days ahead. I also plan on holding to this potential play as a day trade, given how sentiment could turn on a dime in Europe.
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