EUR/GBP price analysis: expanding wedge offer a downside bias
EUR/GBP price analysis: we look for further losses with a move down to the wedge target and previous support at 0.8864
Market highlights from the past week
Monday July 13: in comments on Monday, German Chancellor Merkel stated that Italy and Germany had agreed on the basic structure of the recovery fund, but she was unable to say whether agreement would be reached on the budget and recovery fund at this week’s Summit
Tuesday July 14: there were some concerns that the policy reversal and decision to ban Huawei from the 5G network would have negative political and economic consequences over the medium term
Wednesday July 15: there was little impact from the UK inflation data with the data having no significant implications for monetary policy in the short term
Thursday July 16: the ECB made no policy changes and President Lagarde indicated the whole PEPP emergency bond-buying envelope would be used
Friday July 17: the EU failed to reach agreement on the EU recovery fund over the weekend, but talks will continue Monday amid hopes that progress was being made
EUR/GBP price analysis
Let us have a look at the technical viewpoint.
Monthly: three inside months (candles) posted. Levels above the previous swing of 0.9083 (July 2011) continue to attract sellers.
Weekly: levels close to the 61.8 per cent Fibonacci of 0.9183 (from 0.9500-0.8671) found sellers. The week of June 29 posted a Bearish Outside Candle. This is often seen at the top of a trend and the start of a new downward bias.
Daily: mixed trading for the past 35 (trading) days looks to have formed an Expanding Wedge formation. This has an eventual bias to break to the downside. A move through 0.8950 and the measured move target is 0.8670
Intraday four-hour: levels close to the 78.6 per cent Fibonacci level of 0.9125 (from 0.9176-0.8938) have found sellers. The four-hour chart highlights a bearish Outside Candle. This is often seen at the top of a trend and the start of a new downward bias.
Outlook: we look for further losses with a move down to the wedge target and previous support at 0.8864
Possible trade set-up:
Action: selling at 0.9115 (pivotal)
Stop: 0.9170 (above the trend of higher highs)
Target: 0.8670 (medium-term wedge target)
Potential return on risk to first target: R8 (reward 445/risk 55)
Risk Warning - Your capital is at risk - Losses can exceed deposits
Trading spot foreign exchange and futures on margin carries a high level of risk and may not be suitable for all investors. You may lose all your capital. Past performance is not indicative of future results. The high degree of leverage can work against you as well as for you. Before deciding to invest in spot foreign exchange or futures you should carefully consider your investment objectives, level of experience, and risk appetite. If you are in any doubt about investment or the mechanics of such products, you should seek independent financial advice