FxWirePro: EUR/GBP’s Bears Dance as per RSI Divergence But Major Trend Still Imminent – Trade Ratio Spread

As stated in our previous post, EURGBP bears have shown their bearish effects after RSI’s bearish divergence. 

Technical chart and candlestick patterns: On daily terms, back-to-back shooting star patterns have been appeared at 0.8821 and 0.8820 levels respectively on EURGBP daily plotting and at 0.8982 levels on the monthly chart. These bearish patterns have nudged the current prices below 7-DMAs on RSI's a bearish divergence on monthly terms.

The cross has tested higher and failed at 0.8839 levels again, after the recent consolidation phase. However, 0.8840/50 key pivotal resistance is holding. A decline back through 0.8780/65 support would suggest a return to the range we have been in for the last week or so.

For now, more slumps seem likely on RSI's divergence, above-stated bearish patterns and overbought momentum signaled by both RSI and stochastic on 4H plotting.

The end of last month flow saw the EURGBP spike down to re-test range supports in the 0.8950/0.8863 region. While over that region the risks remain for a test above 0.9100. However, for now, we seem content to remain within a range. Above 0.9100, next resistance lies around 0.9160, the last main technical barrier ahead of 0.9305 (which traded back in August 2017). Below 0.8877, 0.8788 has been pivot support within the medium-term range. Key support in that process is at 0.8700-0.8620.

On a broader perspective, The major uptrend now goes in the range, while bulls attempt to spike further above EMAs but shooting stars & engulfing patterns, on this timeframe also, counter (refer monthly chart). While both leading oscillators and lagging indicators indecisive but slightly on bearish bias momentarily. The re-test of the 2008 highs at 0.9802 level is not disregarded. Nevertheless, the risk of that has decreased as the medium-term range plays out. Any decline through 0.8250 key support would negate upside risks and suggest a move back to 0.8000 marks.

Trade tips: Contemplating above technical factors, we positioned for a modest albeit distinctly bounded relief rally in GBP amid prolonged Brexit dust in the UK parliament through a ratio put spread. Maintain a 2m 1x1.5 EUR put/GBP call spread, 0.88- 0.8650 with a 0.85 RKI on the lower strike. Expiry March 15, 2019. Paid 39bp in November. Marked at 2bp.

Currency Strength Index: FxWirePro's hourly EUR spot index has flashed at -104 (which is bearish), while hourly GBP spot index has shown -92 (bearish) while articulating at 12:49 GMT. 

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