Price action on the EUR/GBP daily chart has continued to make lower highs and respect the .8050 level. The promise of stimulus has kept the euro heavy, but today’s IFO survey of German business sentiment beat market expectations for the first time since April 24th with a 104.7 reading, higher than the forecast of 103.0. A lower euro and falling energy prices may help continue to support the German economy.
Overall, euro/sterling has been in a downward trend since July 2013 to the end of this past September. With the current rally being supported by only one positive German data release, we will look to fade this rally and target weakness to just above the recent lower range.
EUR/GBP opened slightly higher to start the week, but appears to be having difficulty trading above the 100-day Simple Moving Average (SMA). Price has consistently provided sharp drops after breaking below the psychological .8000 handle. Immediate downside targets include the 50-day SMA which is trading around the .7883 level, with deeper support targeting the .7850 region.
The trade: Sell EUR/GBP at .7920, with a stop loss at .7950 and a take profit at .7860. The Risk/Reward Ratio is 1: 2
Edward J. Moya
WorldWideMarkets Online Trading