EUR/GBP rallied almost 30 pips after the 4:30 AM release on Britain’s economy showed that the economy grew by 0.8% in the first quarter of 2014, just missing the forecast of 0.9% but better than last quarter’s 0.7% reading. The kneejerk reaction was a solid weakening in the pound from missing the headline number but that was quickly erased because the trend is still optimistic for the U.K. economy. Today marked the fifth consecutive quarter of steady of growth and even the Chancellor George Osborne said,” Britain is Back”.
Two months ago, I identified a potential bearish Gartley pattern that may test the upper boundary of a falling wedge. Price did weaken after only reaching the 127.2% Fibonacci expansion level, but eventually in March reached our selling entry price and respected the .8400 handle.
The bearish trend now appears to still be valid for the time being. A move towards the 2014 lows may be reached over the next couple weeks. Traders may however see the .8170 respected as a double bottom pattern along with a bullish ABCD pattern is potentially forming. With key resistance coming from the 50-day SMA at .8375, which is also the weekend gap from third week of trade in this month. A strong breakout above that level could place the bullish trend at jeopardy.
The trade: Sell EUR/GBP at .8210, with a stop loss at .8230 and a take profit at .8170. The Risk/Reward Ratio is 1: 2
Edward J. Moya
WorldWideMarkets Online Trading