EURGBP has been on a strong downtrend lately and has been making lower highs and lower lows, trading under a falling trend line and giving a forex trade idea for a short on a pullback.
Price might climb back up to test the trend line resistance near the .8000 major psychological level before resuming its drop to the previous lows near .7900 or lower. Stochastic is already moving down from the overbought zone though, indicating that selling pressure might return sooner or later.
In addition, the 100 SMA (simple moving average) has been acting as resistance for the pair in the recent downtrend over the past couple of months. Price could pull up to this dynamic inflection point to test resistance. Shorting around the .8000 area with a stop above the 200 SMA or the .8000 handle could yield a good return on risk for a longer-term trade with a target of new lows.
Forex Trade Idea Updates
The ECB has recently cut several interest rates in its effort to boost lending and spending in the economy. Aside from that, Governor Draghi has laid out the plans to implement targeted long-term refinancing operations by September and December.
As for the pound, BOE rate hike expectations for the end of the year are keeping the currency supported against its forex counterparts, yielding plenty of long GBP forex trade idea signals. However, manufacturing production turned out to be a disappointment and led to a bit of pound weakness yesterday.
Moving forward though, the pound is still on a fundamentally stronger footing compared to the euro, as the ECB has committed to easier monetary policy while the BOE is more likely to tighten monetary policy. The pick up in risk appetite is also in favor of the higher-yielding GBP for now.
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