After dropping all the way back down to set a low at .7950, EUR/GBP has recovered over the past few trading days and even filled that massive gap from a couple weeks back. Are the bulls gearing up for a major comeback?
Before I get ahead of myself, lemme just point out that this is a COUNTERTREND setup. The euro has been one of the weaker currencies over the past month as Greek political concerns and Spanish bank woes have plagued the shared currency. That's why EUR/GBP has dropped 500 pips from its 2012 highs.
Still, I think there's some potential for all the euro bearishness to ease up over the next few trading days.
Today, we've got an important meeting between newly elected French President Francois Hollande and German Chancellor Angela Merkel. Despite their differences, they've both expressed optimism that EU leaders could work together to keep Greece in the euro zone.
Other data to keep an eye on are the U.K. retail sales and BOE meeting minutes. Seeing as how retail sales growth is projected to drop from 1.8% to -0.8% last month and with how dovish BOE officials have been, I wouldn't be surprised to see the pound sell off later.
As for technicals, this is the reason why I got tempted to put on a position in the first place! Right now, I've got my eye focused on the .8000 to .8010 price area. Not only does this line up with the 61.8% Fibonacci retracement level, but it has also generated interest the past couple weeks.
That said, I'm willing to take my chances on this countertrend setup but will only be risking 0.50% of my account on the trade. As for my profit target, I'm aiming for the recent high at .8100.
Here's what I've got up my sleeve:
Long EUR/GBP at .8010, stop at .7060, take profit at .8100.
Once again, lemme just point out that this is a countertrend setup - it might not be for everybody!
What do you fellas think? Is the trade worth taking?
Personally I am currently short - I entered off the Daily at 0.8055, triggered in through an order overnight (UK) on 21st May. Price is obviously currently battling with the 0.8000 level, but I am thinking the overall picture looks bearish enough to push through it, at least giving us another test of 0.7950.
I do trade countertrend, but on this occasion the overall picture is too bearish for me to want to. I've been wrong before though lol.
Interesting post, thanks for sharing your thinking.