Free Profitable Forex Newsletter
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UK’s Vaccine Advantage Likely to Boost GBP Vs. EUR
Recently, we talked about the fact that the UK is the leader among developed nations in delivering vaccines as a percentage of the country’s population. That advantage, however, hasn’t yet translated into too much GBP strength. As we noted in our most recent weekly analysis, that is mainly due to the economic slump from the harsh lockdowns that the UK Government imposed in December to stop the spread of the new coronavirus variant.
But, as an increasing number of the UK population gets vaccinated with time, the reopening of the economy is inevitable. And it will be sooner in the UK than, i.e., in the European Union. That lead for the UK should eventually prove a tailwind for the pound sterling and help the currency to strengthen a little versus the euro in the coming weeks. Combined with some technical breakouts, the EURGBP pair looks ready to extend the dive lower.
EURGBP Breaks 0.89 Support
EURGBP slipped below that big 0.8900 support last week, but there hasn’t been much follow-through price action lower yet. As is the nature of EURGBP price action, characterized by overlapping price swings even in trends or after breakouts of important technical areas, it is to be expected that these patterns will not change this time. Hence, we should handle with care the shorting of this breakout below the 0.89 support.
With that in mind, it is probably better to wait for rallies to sell rather than chasing the market lower here. And in fact, EURGBP is already bouncing after yesterday’s Fed meeting, so this could be the very opportunity to sell it at higher levels.
Let’s look at the chart below for specific prices where we can short the pair.
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The 0.8900 price zone can be tested again as a way to flush out some shorts. If that happens, 0.8920 looks like a very good area to short because of the falling trendline and prior swing highs that converge there. Keep in mind, though, that EURGBP can go as high s 0.8950, and the bearish breakout of 0.8900 will not be canceled.
The descending channel shown on the chart below has so far accurately defined the downtrend since the December highs. If it stays intact, EURGBP should reach our target area at 0.8700 in the second half of February.
Entry:
- Do not rush to enter; Wait for more confirmation and perhaps a fake move higher that will shake out some short positions;
- Remember, 0.8950 could be tested and EURGBP could still continue lower;
Stop:
- Above your specific entry pattern/signal;
- EURGBP should not break out of the channel to the upside;
- 0.8950 as a resistance zone should hold
Targets:
- 0.8700 area, likely to be reached in mid or late February if EURGBP stays in the downward channel
Trade signals from the past week
- January 28, Long EURCHF from 1.0760 (in progress); trade idea sent on January 22
TOTAL: 0 pips in the past week
TOTAL: +3555 pips profit since October 1, 2018
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Thank you!
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Any opinions, news, research, predictions, analyses, prices or other information contained in this newsletter is provided as general market commentary and does not constitute investment advice. FX Trading Revolution will not accept liability for any loss or damage including, without limitation, to any loss of profit which may arise directly or indirectly from use of or reliance on such information.
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