FxWirePro: EUR/GBP shooting stars counter hammers, RSI divergence still signals interim bears in major uptrend – FX derivatives trade setup

EURGBP bulls take-off the current prices above 7 & 21-DMAs upon hammer patterns, the frequent occurrence of shooting stars at the stiff resistance of hampers previous bullish sentiments, both momentum oscillators signal intensified bearish momentum (refer 4H chart). We’ve seen the failure swings at the stiff resistance of 0.8646 levels.

Consequently, bears are back in the business upon shooting star & RSI divergence (on monthly terms), 

While the major uptrend has been prolonging in the range, shooting stars and bearish engulfing patterns that attempt to drag slumps (refer monthly plotting), both the leading oscillators and lagging indicators on this timeframe have been bearish bias.

Although the pair’s upswing is currently trading in the midst of the current 0.8470-0.8720 range momentarily for the day, the underlying technical outlook remains bearish, but a break of 0.8594 and 0.8470 is needed to confirm and open a move towards the more significant medium-term 0.8350-0.8250 lows. 

On the contrary, a rally through 0.8725 would negate that bearish dynamic and suggest a return to the previous upper range, in which pivot resistance is at 0.8840/60 and key resistance remains at 0.9100-0.9170.

On a broader perspective, a decline through key 0.8350-0.8250 range lows is needed to indicate a major shift in sentiment, suggesting a move to 0.8000 levels.

Trade tips: On trading perspective, at spot reference: 0.8622 levels, contemplating above-explained technical rationale, it is advisable to trade barrier option strategy using boundary strikes, upper strikes at 0.8650 and lower strikes at 0.8604 levels, the strategy is likely to fetch leveraged yields as long as underlying spot FX remains between these strikes on expiry duration.

Alternatively, on hedging grounds ahead of ECB monetary policy this week, we advocate initiating shorts in EURGBP futures contracts of Apr’19 delivery as further downside risks are foreseen and simultaneously, longs in futures of June’19 delivery for the major uptrend. Thereby, one can directionally position in their FX exposures. The directional implementation of the same trading theme by further allow for a correlation-induced discount in the options trading also if you choose strikes appropriately.

Currency Strength Index: FxWirePro's hourly EUR spot index is inching towards 120 levels (which is highly bullish), GBP is at -77 (bearish), while articulating (at 11:55 GMT).

For more details on the index, please refer below weblink: http://www.fxwirepro.com/currencyindex