EUR/GBP: Momentum Remains Strong Yet Its 9-day Streak Could Be Pushing It
Matt Simpson May 16, 2019 9:16 PM
EUR/GBP has been kind to bulls of late, and the intraday trend remains strong. Yet caution is required on the daily chart given the extended nature of price action.
As traders we need to have a bullish or bearish bias. Yet stating one without considering a time horizon is of little use, given the fractal nature of markets. And a good example of this is on EUR/GBP which could provide two opposing views depending on your timeframe.
On the four-hour chart we can see a strong bullish trend with a series of higher lows and shallow pullbacks. Moreover, without immediate signs of a top then we could assume the trend is to continue higher and head towards the 0.8768 high. Grated, RSI is ‘overbought’, yet this is exactly where we’d expect it with strong momentum. And the MACD and signal line have converged, yet overall both indicators point higher and there are no signs of a bearish divergence.
Prices are currently supported by the 8 period eMA and printed a potential swing low. From here traders could drop to a lower timeframe and seek bullish continuation patterns ahead of the weekend, until signs of weakness materialise. However, we urge caution as we approach the weekend given the extended nature of price action on the daily timeframe.
As of yesterday’s close, EUR/GBP closed higher for the 9th consecutive session (an event not seen since 2008 highs) and has had its best 9-day run since 2017. Furthermore. a small bearish hammer has appeared at the top of the Keltner band, so we’d prefer to seek a retracement before entering on the daily timeframe. Keep in mind we’re not saying it cannot go higher from here. But given we’re approaching the weekend after such a strong run, traders may want to book profits. But, more importantly, the reward to risk if less favourable at current levels given its close proximity to the 0.8768 high. Overall, we expect EUR/GBP to break higher and retest the 0.8840 high.
Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.