ANY RALLIES TOWARDS 0.8700 TO BE USED AS SELL OPPORTUNITY
Eur/Gbp: While we realize it is a ways off, we like the idea of selling the cross into any major rallies on Wednesday. The market has been rallying over the past few days and it looks like more gains are in the cards over the coming session. However, the broader trend remains firmly bearish and any gains towards the 0.8700 inter-day consolidation highs are expected to be met with some good selling from existing shorts looking to build on longer-term positions. The catalyst for today’s push higher will undoubtedly come on the back of this morning’s gloomy inflation report from the Bank of England, but we contend that any Sterling fallout will not last long, with many investors already pricing in the more downbeat BOE following the previous week’s unexpected extension and increase in the central bank’s QE programme. Data out of the Eurozone has also been less than impressive and should not be forgotten with the region also infected with uncertainty. As such, we will happily look to sell on approach to 0.8700 today in anticipation of a bearish resumption. In recent days we have seen the daily ATR well exceeded with the cross putting in ranges of about 110 points and we will use this insight as a guide for our sell entry today which directly coincides with the upper Bollinger band. STRATEGY: SELL @0.8680 FOR AN OPEN OBJECTIVE, STOP @0.8780. RECOMMENDATION TO BE REMOVED IF NOT TRIGGERED BY NY CLOSE (5PM ET) ON WEDNESDAY.
Written by Joel Kruger, Technical Currency Strategist for DailyFX.com
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