Free Profitable Forex Newsletter
Hey! This is Philip with this week's trade idea of the Free Profitable Forex Newsletter!
The dovish message from the Bank of England last Thursday crashed the pound in the Fx market. While GBPUSD is consolidating due to the broader consolidation in the dollar, the pound is weakening more notably against other currencies, underlining the importance of the
shift in the BOE’s policy stance. In regards to this, EURGBP looks particularly interesting as it completed a weekly bullish breakout on the BOE announcement, suggesting it could have been an important turning point for the pair.
For instance, the primary fundamental driver behind the steady downtrend in EURGBP for the past 12 months was the more hawkish BOE relative to the ECB. Now that the BOE has clearly shifted to a more dovish stance, it leaves the pound vulnerable to further losses. At the same time, ECB communication is getting more and more hawkish (or perhaps better said, uncomfortable) as
a result of the high inflation in the Eurozone. Thus, last week’s breakout in EURGBP could finally be a reversal, as we may be entering a period where the ECB will be more hawkish relative to the BOE.
Bullish breakout on weekly chart and a higher high
Last week, EURGBP completed a bullish breakout of the 1-year downward channel. There were many previous attempts at this resistance line, but the weekly close never got above a previous swing high. This time it did, and the weekly candle also closed strongly in the green.
The fact that the technical break came right on the BOE meeting last week is perhaps another sign that this time the breakout is genuine. In the Fx market, a strong fundamental catalyst is usually needed to break an important support/resistance zone that has been holding for such a long time. The Bank of England meeting could be that catalyst in this case.
An inverse head and shoulders is also worth mentioning. It is not the perfect-looking pattern, but it is a head and shoulders, nonetheless. EURGBP broke this neckline too last week. The projected target to the upside is at the 0.88 zone.
Despite the upside breakout and bullish change in the fundamental dynamics, we should be watchful for consolidation in EURGBP too. There are signs this is already happening, and if EURGBP retraces a little more, it could provide us better levels to enter long. Going long at lower levels will also allow for a tighter stop; hence this seems like the preferable approach in the
current technical circumstances on EURGBP.
Look for a move back toward the broken resistance zone and for a retest there. It is also located at the 0.8450 zone, which is also a Fibonacci confluence area, and is likely to act as a key support zone (see chart below). If EURGBP comes back to retest it, some reaction here seems very probable. Thus, such a scenario could be an
attractive opportunity to enter long.
Entry:
- Look for dips below 0.85 and then for potential bullish signals to enter long;
- The 0.8450 zone is strong support, so it is the optimal area to look for long entries
Stop loss:
Targets:
- 1st - 0.8700
- 2nd - 0.8800 zone
Trade signals from the past weeks
- May 02, 2022 - Long USDJPY from 130.10 (open in progress); trade idea sent April 28
TOTAL P/L in the past week: N/A
TOTAL: +5540 pips profit since October 1, 2018
If you have any questions or feedback, don't hesitate to reply to this email.
Thank you!
P.S. Email providers such as Gmail and Yahoo! Mail sometimes place messages in different folders or tabs (often in the promotions tab). You can whitelist my email address to ensure that all trade signals I send will end up in your (primary) inbox folder.
High Risk Warning: Please note that foreign exchange and other leveraged trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved, seeking independent advice if necessary.
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.
|
|
|
|
