The Forex Chronicles

EUR/GBP May Find Support At 2018 Low

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Recent Price Action

The British pound has rallied strongly in recent weeks as the threat of a no-deal Brexit recedes and the likelihood of a delayed Brexit increases as the days go by.

Subsequently the GBP/USD and the GBP/JPY have both moved strongly higher, and the EUR/GBP has fallen sharply as it has strengthened against the Euro.

It is this particular pair that I want to focus on in this article because this popular, slow-moving forex pair is now trading close to a key support level that may just prevent the price from falling any further.

2018 Low

The support level that I am talking about is simply the low of 2018. As you can see in the weekly chart below, the lowest price from last year was 0.8620, and interestingly enough, the current price at the time of writing is just a fraction above this at 0.8634, although it did actually hit this price yesterday before reversing.

EURGBP Weekly Chart - January 2019

Therefore as we haven’t really seen any strong support in this recent price fall, this may be the point at which traders start to bank their profits and open new long positions if there is the slightest indication of strength or a clear sign of a reversal.

Potential Trading Opportunity

Whenever the price of any instrument approaches a key support or resistance level, it is always interesting to watch the price action and see how it reacts around this level.

So in this case we really need to see clear signs of strength in order to be confident of a reversal, even if it turns out to be a relatively modest one.

The price of any pair that includes the British pound is still heavily influenced by Brexit, which means that this is not really a time to take long-term trades.

This is a time to take quick short-term technical trades and get out as soon as you are showing a decent profit, and so it may be worth opening a long trade on a pin bar, for example, on one of the lower time frames.

Alternatively if the price ambles along around this key support level and doesn’t really show any real signs of strength before eventually breaking below this level, this could be a time to jump on board with a short position.

That’s because the price is now trading close to the 200-week exponential moving average, and there is a lot of downside potential if the price breaks below this level.

Either way, it is worth keeping an eye on this particular pair to see what happens in the coming days.

EUR/GBP A Sell At 0.8900?

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Brexit Chaos

Some financial experts have recently claimed that the GBP pairs have become untradable just recently as a result of the ongoing chaos surrounding the Brexit negotiations, and it is hard to disagree with this.

That’s because there is so much uncertainty surrounding the Brexit deal, and so many questions still to be answered:

  • will Theresa May survive a plot to oust her from within her own government?
  • if she survives, does she have enough support to get the agreement through?
  • will the Brexit deal be delayed or changed if there is a change in leader?
  • will there be a catastrophic no-deal Brexit?
  • could there even be a second referendum?

It seems that every day that are several stories that only add to the confusion and chaos, and all of these events have a major effect on the GBP pairs.

However at the time of writing, it would appear that Theresa May’s position is looking a little stronger, and there is a greater likelihood that her Brexit deal will go through, although there are no still no guarantees of anything of course.

Time To Sell EUR/GBP?

The Euro rallied hard against the pound last week for obvious reasons, moving from 0.8656 to a high of 0.8908, but it is clear from looking at the price chart that the price has reached the upper trendline that has recently been established:

EURGBP Price Chart - November 2018

Subsequently, this trendline may well act as a strong resistance level in the coming days and weeks, even amidst all of the ongoing chaos surrounding Brexit.

Potential Trading Opportunity

The longer term downward trendline currently sits just above the 0.8900 level, which is interestingly a nice round number. So this is another reason why this pair may be sold off at this key level.

Therefore if you were thinking of trading this EUR/GBP pair, it might be worth looking for a strong reversal signal around this 0.8900 level, such as a pin bar or a divergence pattern on the MACD, RSI and stochastics indicators.

You could also move down to the 4-hour chart and look for the same reversal signals on this lower time frame to get you into a trade earlier.

Anyway these are just my own thoughts and opinions on the future direction of this pair. At this moment in time, I would say that a reversal is looking more likely, particularly with Theresa May’s position strengthening, but please note that I am not offering any trading or financial advice. This would still be a risky trade because this and other GBP pairs are still vulnerable to any major Brexit developments.

Possible Channel Breakout On EUR/GBP Pair For September 2018

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Introduction

I have recently been discussing why the EUR/GBP is no longer an easy pair to trade, particularly from a day trading point of view.

I also highlighted the fact that this pair has been trading in quite a sideways trading range for a long period of time now, making it fairly difficult for long-term traders to trade as well.

All of the points raised in this article still hold true today, but that doesn’t mean that you still can’t make money trading this pair. There is still the potential to trade any breakouts when they occur, and to take advantage of any new trends that are emerging on the price chart of this pair.

Rising Channel

The EUR/GBP has indeed been trading in a sideways range if you look at the long-term price chart, but in recent months it has started to trend upwards and post new highs for 2018.

You will also notice that it has been trading within a rising channel if you draw some trendlines on the daily chart, and is now interesting to watch because the price is at a critical point at the moment.

EURGBP Rising Channel In 2018

After posting a yearly high of around 0.9099, the price of the EUR/GBP pair has dropped back nearly 150 points to just over 0.8950, thanks largely to positive news regarding Brexit boosting the British Pound, and is trading right at the bottom of this rising channel, even dipping below it at one point during yesterday’s trading session.

Trading Opportunities

I have to admit that the EUR/GBP isn’t the best pair to trade breakouts with because the resulting price movements can be quite small on occasions.

Nevertheless it might be worth watching to see if the price can close decisively below this channel for an opportunity to open a short position. It may also be worth waiting for a downward breakout followed by a retracement and then a secondary price move downwards for confirmation of a breakout, although you then run the risk of missing out altogether if there is no retracement at all, which can sometimes happen.

It all depends on where the price goes from here. This lower trendline may in fact act as support once again, and subsequently push the price back up to the upper trendline, making new highs in the process.

If it does so, there is strong resistance at the top of the trendline, and further resistance at 0.9300 if the price breaks through the upper trendline because this was the high of 2017, and is also a round number that has a lot of significance in the eyes of traders.