We have an ECB meeting coming up this week. The market expects the ECB to cut the APP in half and let it run until September next year though Sep 2018 has not been communicated as the end date for QE (this is what caused strength in the Euro at the last meeting). The purpose of the APP is to weaken the Euro, buying half the amount of bonds per month means a less weak Euro which is the same as saying a stronger Euro. You might say the politics in Germany would be a case for further downside and you might be right though you have to agree that less QE is a form of tightening and that if yields go higher (a result of buying less bonds) the currency will strengthen. Politics causes waves, monetary policy is the ocean so what we need a steady course, the correct instruments and good timing. Do we think that as we head into a key meeting by the central bank for the European Union, markets are going to avoid buying the Euro, which is fundamentally going to appreciate, because they are concerned about some political risk in Germany?

We also have a BOE meeting coming up this week just before the ECB. I don’t expect a hike though I am paying attention to how the MPC responds to developments in the behavior of households and businesses and the outlook for inflation since their last meeting. The BOE is on a tightening path so as far as monetary policy is concerned so there is good reason to be bullish fundamentally. With the first round of Brexit negotiations out of the way, that has should remove some of the uncertainty in the market which has reflected in recent Pound strength. I am also paying attention to the 7/2 vote split from the previous meeting to see if any previous doves have moved over into the hawk camp or visa versa – the market will be paying attention to this.

Due to these fundamentals I expect sideways trade in EURGBP as we head into the end of the year and see it as a good idea to take profit at key levels of support or resistance depending on whether you are buying or selling.

Predicted Weekly Pivot Points
EURGBP
WR3: 0.90011
WR2: 0.88811
WM4: 0.88570
WR1: 0.88328
WM3: 0.87970
WPP: 0.87611
WM2: 0.87370
WS1: 0.87128
WM1: 0.86770
WS2: 0.86411
WS3: 0.85211

Note. Pivot points are just projections and may differ at market open. Calculated using high, low and close of the previous week as per FXBootcamp Guide to Strategic and Tactical Forex pg. 668

EURGBP Daily

Price failed to break out and if you are a Euro Bull then that stoch is gorgeous. Note this level of support is the 61.8% fib from the low back in April 2017 and the high in Aug 2017. No surprise if we head back up to MR1/ 0.90 though resistance at MPP is very strong.

EURGBP H4

According to predicted pivots, price is going to open at WM3, Bears are going to sell down to support at WPP or 0.8750/ WM2 giving Bulls a second chance to enter the long off the double bottom formed on M15 at the weekly bearish target on Friday (see charts below). The target for Bulls, according to predicted pivots, has confluence with MPP - this is a very strong level of resistance and a good place to take profit or at least adjust your TP as we move up to this level. Keep in mind that central bank releases bring high volatility to the market and BOE is before ECB. One last thing to note on this chart before looking at H1 and M15 is the H4 stoch signaling a move higher.

EURGBP H1

So we fib the move up from last week's WM1 (the 61.8% shown on the Daily chart) and note the we have a predicted WM2 at the 61.8% fib which has a target of 138.2% fib extension which is also the projected WM4 and this month's MPP. The reason I am showing this chart is because of the stoch - price is bearish so we expect a move down. Predicted WM3 gives Bears the right price to sell.

EURGBP M15

A break out of the bottom of the range followed by a double bottom at the weekly target indicates that the recent move below 0.8750 was a fake out and that we don't expect price to breakout to the downside in the near term. If price does breakout to the downside below last Friday's double bottom then this is a clear signal that price is heading a lot lower. Note that Bulls are waiting for their second chance to buy after that failed bottom.

One thought on “The Long and the Short of EURGBP with predicted pivots”

  1. Ryan Gandalf van Jaarsveld says:

    To anyone reading this, apologies for the lack of accuracy regarding the pivot points on this pair. I used a high, low, close indicator on this trade plan and calculated all the other plans manually not realizing that there was an error with the indicator. All the other plans are spot on. Kind of complicates things because support and resistance are going to be slightly different though the strategy is still the same. Won’t make the mistake again.

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